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Spain Struggling as Bankia Seeks Government Bailout

Spain Struggling as Bankia Seeks Government Bailout

Eurozone issues have been dominating headlines over the last few months with fears of Greece leaving the euro and many countries facing high unemployment numbers. Spain has certainly seen its fair share of difficulty and adversity. The Indignado movement that started last year involved thousands of frustrated Spaniards gathering together to protest increasing austerity measures implemented by the government.

Youth unemployment is at about 50 percent, according to NPR. Along with growing discontent in the job sector, taxes have been raised and austerity measures threaten at every corner. Many social services look to get slashed.

In tandem with the growing concerns about increasingly crushing austerity measures, Spain’s banks are also facing a difficult era during this European economic slump. The BBC reports that Bankia, Spain’s fourth largest bank, has officially asked for a 19 billion euro bailout. Bankia was created two years ago as a merger between seven struggling regional banks.

Bankia emphasized to its customers that their money was still safe in the hands of the institution. The group claims that this loan will help the bank maintain liquidity and stability in the increasingly unstable banking and economic system.

The New York Times reports that about 51 billion euros have left the Spanish bank over the last year. Investors have been slowly moving their assets to other countries that have more financial stability.

Spain’s credit rating was downgraded by Standard and Poor recently, according to the BBC, which means that markets will demand close to a 7 percent interest rate to loan funds for a ten-year period. Greece is closer to 8 percent at the moment and Germany now sits at a cool 1.42 percent.

Rumors of a full-on bank run went rampant this past week as financial experts speculated on the state of Spain’s banks. Although most officials have said that the withdrawal of assets from banks is more of a slow trickle than a catastrophic collapse, fears continue about the continued draining of accounts.

Banks are not the only area of the Spanish economy facing difficulties. Catalonia, the wealthiest region of Spain, has asked for a loan from the government as well. The region has 13 billion euros to refinance this year. Catalonia has implemented a wide number of austerity measures to get the economy back on track. According to Yahoo! News, it has:

Cut public sector wages, instituted a tourism tax and a 1 euro charge to fill each medical prescription, applied the maximum surcharge on gasoline and frozen infrastructure investments to try to get the budget under control.

All of these controls come in the wake of crucial meetings between the big heads of state in the European Union, including Germany’s Angela Merkel and France’s new president François Hollande. These two leaders are notoriously opposed when it comes to implementing austerity measures on countries such as Spain and Greece. Merkel maintains that austerity measures need to be implemented, while Hollande emphasizes that some restrictions need to be lifted to encourage growth.

The Indignado campaign still exists, although many participants are beginning to feel a sense of hopelessness. With banks and regions going through massive structural changes in Spain, it remains difficult to predict how many of the economic hurdles will be overcome. Many officials fear that summer unrest could mark Spain, Greece and Italy as restless and unhappy populations demand change.

Related Stories:

Greece Faces Fresh Elections… And a Future Without the Euro?

German Minister Dares Greece to Leave the Euro Zone

Spain, Greece and Italy Face Summer Unrest

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Photo Credit: Marcello Vicidomini

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18 comments

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2:36PM PDT on Jun 4, 2012

ty

11:49AM PDT on May 30, 2012

The problem that is affecting Spain (and Greece, Italy, Portugal and Ireland for that matter) is that financial union between countries (that is the Euro) cannot exist without political union, that is the EU becomes a series of federated states, like the US.

Withouty this all that the Euro (single currency) did was to encourage the banks to lend money to some countries at a much lower rate than had previously been the case; this encouraged countries such as Spain to borrow and spend which led to a short-term boom - history tells us that any short-term boom is often followed by a long period of pain. This is what Spain (and the other countries now face)

Spain is a strong country with a resiliant population, times will be tough (and the pain will be felt beyond those countries immediatley affected - the US does a lot of trade with the EU for instance, so does China and India) but things will eventually even out.

5:04AM PDT on May 30, 2012

I know Troy, that is what plotocrats wants "all the others" (the poor ones) to do: share! But they never will share their wealth with all the others (we)!!
You were just being sarcastic, weren´t you???

3:28PM PDT on May 29, 2012

Austerity---the plutocrat's solution for having to share.

12:00PM PDT on May 29, 2012

Life is a0bout choice

11:13AM PDT on May 29, 2012

Isn't it a shame that the GREED of some people has ruined the world economy?

10:54AM PDT on May 29, 2012

This economic crisis is so much bigger than any one man or even political party can handle. It is international in scope, including China, indicating that is larger and more encompassing than just the result of human error. The timing is interesting. There are spiritual masters who have been advocating for a few years now that their followers should collect in self sustainable communities in preparation for a breakdown such as this.

And it isn't just economic. Is this Great Recession connected somehow with climate change and global warming? How does this connect with this year of 2012 in Mayan prophecy? Perhaps there is such a thing as an end-time, and we are in one now? Over 500 myths tell of an end-time in the past, with those from higher civilizations telling of several, or even a recurring cycle of such events. Native Americans are adamant that we are leaving behind the Fourth World and entering the Fifth World. Our own Christian religion is almost exclusively based on prophecy, Apocalypse, and Armageddon.

I saw this economic meltdown coming some 35 years ago when I began studying the possible accuracy of astrological ages. And it hit exactly on time. There is something more going on here than just human beings living life any way that we want.

http://www.signsofthetimeshistory.com/

9:08AM PDT on May 29, 2012

Middleclass is disappearing and each day that passes, the rich ones are richer and the poor ones poorer! We are going back to the Middle Ages, where the rich ones got all the wealth and the poor ones got the starvation. Money is the power nowadays and as the rich ones have the power, they do what they want and with this power and even achieve, that their "muddy businesses" will not be investigated!!
Is this already the end of evolution???

7:27AM PDT on May 29, 2012

Em primeiro lugar quero dar os parabéns a este povo que saiu á rua em defesa dos seus direitos o povo Español Em segundo a zona do Euro está cada vez mais afundar-se hoje fala-se uma coisa há manha fala-se duas coisas. sinceramente eu não tenho nenhuma idéia quanto tempo isto vai durar nem eu nem os cidadãos Europeus nós estamos nas mãos dos lideres Europeus

6:56AM PDT on May 29, 2012

It's the little people and the animals will suffer - the Spanish King broke his hip in Africa before he went on his animal killing spree - the people of Spain suffering and their King off on a trophy hunting trip - that is the problem - corrupt at the top!

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Thanks for the follow up article and the comments......should never of been charged in the first place.........good…

Isn't it amazing how the US sits in judgment over the rest of the world and keeps pounding on every mistake…

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