Spain to go to market to fund Bankia, regions -source

MADRID Tue May 29, 2012 10:39am BST

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MADRID (Reuters) - Spain will recapitalise nationalised lender Bankia (BKIA.MC) by issuing new debt, not by injecting bonds into the lender, and will likely adopt on Friday a new mechanism to back its regions' debt, a government source told Reuters on Tuesday.

"There is a clear preference to tap the market. The other option (injecting state bonds directly into Bankia) is marginal," the source said.

"The (bank restructuring fund) FROB has liquidity and can tap the market. The Treasury also has a strong liquidity position. We'll choose one or the other mechanism."

The source also said the government would task the Treasury with issuing and distributing debt to the regions, under strict conditions of meeting deficit targets and implementing austerity plans.

(Reporting by Julien Toyer; Editing by Sonya Dowsett)

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Comments (1)
JenkinsComp wrote:
So this is a Spanish government bail out, not a Bankia bail out.

If all Bankia is doing is passing on the Govt bonds directly to the ECB in exchange for cash, then other Eurozone nations have effectively just bank rolled another Spanish govt bail out by funding the bonds they are printing, and at some point in the future the ECB will pass on the inevitable losses on the Spanish Govt bonds to….Eurozone taxpayers!!

How democratic of them.

May 29, 2012 11:10am BST  --  Report as abuse
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