Spain To Sell Bonds To Pay For Bankia Bailout

Posted on : May 30, 2012 By
Current Events Economics 

By David Roman & Jeffrey T. Lewis | From MarketWatch.com | On Wednesday, May 30th, 2012

MADRID (MarketWatch) — Spain’s government on Wednesday clarified its rescue plans for Bankia SA (BKIA.MC), saying it will pay for the EUR19 billion ($23.6 billion) bailout with cash raised through an auction of treasury bonds.

Finance Minister Luis De Guindos denied reports that the European Central Bank rejected a plan to fund the ailing lender directly with bonds it could exchange for cash from the ECB.

For their part, ECB officials signaled they would oppose any attempt to fund Bankia via the central bank’s lending facilities, according to people familiar with the situation. The ECB said Spain’s government hasn’t contacted it about the Bankia rescue.

Spain is coming to the aid of Bankia, its third-largest lender by assets, at a time when its finances are stretched to their breaking point and the government is desperately trying to ward off an international bailout.

Spain’s own bank bailout fund has only about EUR9 billion left. The country has seen its borrowing costs soar and demand fall in recent auctions. Spanish bond yields have reached levels close to those experienced by the likes of Ireland and Portugal before they requested bailouts.

De Guindos also said Spain’s banks will be asked to set aside EUR84 billion to cover potential losses on real estate this year and that this money can be raised via results, asset sales or from investors.

“Bankia is not the start of the problems. What the government is doing is accelerating the process of fixing Spain’s banking sector,” de Guindos said.

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This article was originally posted at http://www.marketwatch.com/story/spain-to-sell-bonds-to-pay-for-bankia-bailout-2012-05-30-7103103

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RSOP is the co-founder & Executive Editor of Radical Survivalism Webzine, as well as a Family Preparedness Consultant with over seven years of personal experience in the self-reliance game. RSOP's many preparedness roles within his own group include team mechanic, head of security, electrician, and project designer/engineer.