Tess Vigeland: The U.S. markets may be closed on this Memorial Day holiday. But in Europe, shares in one of Spain's largest banks took a beating. The losses came after news that a government bailout will cost about $19 billion more than expected. Meanwhile it's not exactly clear how the Spanish government will pay for that bailout. The ongoing banking crisis there has pushed the cost of borrowing to a near-record high.
Marketplace's Amy Scott has more now on what that means for the European economy and why it matters here.
Amy Scott: This story will sound familiar. Spain had a long real estate boom that went spectacularly bust about five years ago.
Peter Hahn teaches finance at the Cass Business School in London. He says now Spain's regional banks are sitting on billions of euros of bad debt.
Peter Hahn: This group of banks essentially lost money the old-fashioned way.
By lending it, to homebuyers and developers who now can't pay. A few years ago seven regional banks merged to create Bankia. As losses piled up, the Spanish government seized the bank earlier this month. And with more banks on the verge of collapse, Hahn says there's talk in Europe of a U.S.-style bank bailout.
Hahn: If the European Union were to put up funds, which is largely Germany, could those funds be used to recapitalize weak banks around the southern part of the EU, and break this cycle?
Spanish Prime Minister Mariano Rajoy dismissed the idea of an international bank rescue today. And analyst John Raymond with CreditSights doesn't expect much fallout here in the U.S. He says Bankia's troubles are specific to Spain.
John Raymond: Not many foreign banks or other investors will have exposure to Bankia. It's very much a domestic entity, and last year in its IPO, most of the shares went to domestic investors as well.
But Spain's troubles are fueling more talk of a breakup of the eurozone, which could disrupt global trade and hurt U.S. companies doing business in Europe.
I'm Amy Scott for Marketplace.