New euro threat as Bankia to seek €15bn state bail-out

SPAIN’S Bankia was last night poised to ask for a state bail-out of more than €15 billion (£12bn), marking another rise in the cost of a long drawn-out rescue of the country’s fourth-biggest bank.

Concerns over the scale of the bail-out contributed to the euro tumbling to almost two-year lows against the dollar, with the currency also rattled by fears of a possible Greek exit from the eurozone and the risk other debt-plagued countries could also leave.

The capital shortfall at Bankia is key to a wider funding gap in Spain’s banking system, which some investors believe could drive the eurozone’s fourth-largest economy to seek international aid – a move that would create fresh uncertainty around the whole currency union.

Spain is nationalising Bankia, which holds 10 per cent of the country’s bank deposits, after it was unable to handle heavy losses from 2008’s property crash.

Madrid insists Bankia is a one-off case but one London-based analyst warned that the Spanish government’s handling of the issue had undermined confidence in whether the bail-out figure announced would be high enough.

“Whatever they say, people are going to think it’s not enough,” he said.

“The process has been going on for so long already.”

Earlier this week, Spanish economy minister Luis de Guindos told a congressional committee that the state would have to put at least €9bn into Bankia to cover losses on bad loans and repossessed housing.

The government has already spent €4.5bn to prop it up. De Guindos had pledged in the past that no public money would be put into the banks.

Bankia’s new management team was said to be analysing the financial position of the lender before considering whether to approve a recapitalisation plan at last night’s board meeting.