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BBC World Service

Spain may bail out troubled Bankia

Tom Burridge May 8, 2012

Stacey Vanek Smith: In Spain, the goverment is preparing a bailout for one of the country’s biggest banks, Bankia.

The BBC’s Tom Burridge reports.

Tom Burridge: It’s the banking group in Spain with the largest amount of real estate on its books. Analysts reckon its total assets are worth some $390 billion — that’s equivalent to nearly a third of the Spanish economy. The problem is that Spain’s construction boom crashed in 2008, and now the bank holds billions of dollars of bad property assets.

The new Spanish government has said time and again that it would not put public money into the banks — it now looks set to pump in the region of $9.1 billion into Bankia. It’s an idea that some in Spain don’t like.

Man: It doesn’t seem right to me because the banks should be responsible for themselves. If a small business does badly, then the government isn’t going to rescue them.

Shares in Bankia dropped sharply this morning. This comes at a time when Spain’s government is desperately trying to balance its own books. But the Spanish prime minister said he is willing to bail out Spanish banks — if it was in the interests of the Spanish economy.

From Madrid, I’m the BBC’s Tom Burridge for Marketplace.

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