Bankia group risks dragging the rest of Spain into its vortex.
As Spain's third-biggest bank asks Prime Minister Mariano Rajoy's government for 19 billion euros ($24 billion), international investors are tallying the potential cost for the rest of the industry and betting he won't be able to foot the bill. With foreign investors shunning Spanish debt, leaving national banks to fund the government, the nation's 10-year borrowing costs compared with Germany's are near a record.
"The problem for Spain is that they can't simply finance all this by issuing debt," said Edward Thomas, who helps manage $6 billion as head of fixed income investment at Quantum Global Wealth Management in Zug, Switzerland. "It's a perfect storm for Spain, with more banks now being sucked in."
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