MADRID, May 25 (Reuters) – Financial troubles at a big Spanish bank and one of the country’s richest regions, Catalonia, piled on problems on Friday for the Madrid government and for investors who question whether it can pay its debts without help from euro zone allies.

Bankia SA, Spain’s fourth biggest bank and newly nationalised, asked for a bailout of 19 billion euros ($24 billion) to repair losses caused by a burst property bubble, a financial sector source said – more than double what the finance minister said just days ago would be the least that was needed.

And the president of Catalonia, one of the wealthiest of Spain’s 17 regions, said high interest rates demanded by wary creditors were making it hard for his administration in Barcelona to raise funds.

He called on the central government in Madrid to guarantee joint bonds issued by regional authorities or otherwise underwrite regional financing: “We don’t care how they do it,” Artur Mas told reporters, saying the Spanish economy would not grow if the regions struggle to pay monthly bills to suppliers.

Investors believe the banks’ capital shortfall and a credit crunch for regional governments could force the euro zone’s fourth-largest economy to seek international aid – a move that would throw further doubt on the future of the currency union.

Adding to a miserable day for Spanish investors, Standard & Poor’s lowered its ratings on the debt of Bankia and four other banks and said it was taking a dimmer view of Spain’s economy:

“Spain is entering a double-dip recession that will likely trigger a large increase in the volume of problematic assets that the financial system will accumulate in 2012 and 2013, which in turn will lead banks record high credit provisions.”

May 25 (Reuters) – Central banks and companies not bracing for a possible Greek euro exit would be making a grave error, Belgium’s foreign minister said on Friday, rattling markets already alarmed by Spain’s deteriorating finances.

Greek elections are due on June 17 and could hasten the country’s departure from the currency club should a government intent on ripping up the country’s bailout programme result. Polls suggest the outcome is too tight to call.

Greece accounts for little more than two percent of the euro zone economy but could pose a profound contagion threat if it quit the currency area, throwing the spotlight on Portugal, Spain and even Italy.

“There is no organised discussion at the European level along the lines of: what do we do (if Greece leaves),” Belgium’s Didier Reynders told the European American Press Club in Paris. “Now, if central banks and companies are not preparing for the scenario, that would be a grave professional error.”

Spain is in plenty of trouble even disregarding any backwash from Greece.

Its important autonomous region, Catalonia, said it needed help from the central government because it was running out of options for refinancing debt this year.

“We don’t care how they do it, but we need to make payments at the end of (each) month. Your economy can’t recover if you can’t pay your bills,” Catalan President Artur Mas told reporters.

MADRID, May 25 (Reuters) – Spain’s wealthiest autonomous region, Catalonia, needs financing help from the central government because it is running out of options for refinancing debt this year, Catalan President Artur Mas said on Friday.

“We don’t care how they do it, but we need to make payments at the end of the month. Your economy can’t recover if you can’t pay your bills,” Mas told a group of reporters from foreign media.

The debt burden of Spain’s 17 highly devolved regions, and rising bad loans at the country’s banks, are both at the heart of the euro zone debt crisis because investors are concerned they could strain finances so much that Spain, the currency bloc’s fourth biggest economy, will need an international bailout.

Catalonia, which represents one fifth of the Spanish economy, has more than 13 billion euros in debt to refinance this year, as well as its deficit.

All of the regions together have 36 billion euros ($45 billion) to refinance this year, as well as an authorised deficit of 15 billion euros.

Last year many of the regions financed debt by falling months or even years behind in payments to providers such as street cleaners and hospital equipment suppliers.

This year the central government provided them with a special credit facility from the Official Credit Institute, or ICO, to pay providers, of which Catalonia has taken 2 billion euros.

MADRID (Reuters) – Spain’s prime minister voiced concern on Wednesday about the state’s ability to finance itself as fears mounted over a spread of the euro zone debt crisis from Greece and a nationalised bank delayed publishing accounts amid talk of it needing more aid.

With creditors spooked by Greece’s difficulties further east along the Mediterranean, the cost of borrowing for Mariano Rajoy’s government hit 6.5 percent on benchmark 10-year bonds, more than 500 basis points above German debt and a record in the 13 years the two states have shared the common currency.

“It’s a difficult and complicated situation,” the premier told reporters in parliament as traders wondered whether Madrid might one day, like smaller Greece, Portugal and Ireland, need foreign help. “The risk premium has risen a lot and that means that it is difficult to finance yourself at a reasonable price.”

The 10-year yield spread over German Bunds later edged back to about 483 basis points, a shade below Tuesday’s close. But Rajoy, a conservative who wants to cut spending in the teeth of a deep recession and high unemployment, told lawmakers that Spain will still face “astronomical” borrowing costs if it fails to rein in its debts.

The failure of the newly elected Greek parliament to produce a ruling coalition willing to honour the terms of an EU/IMF bailout, and the calling of a new election which anti-bailout leftists may well win, has increased the possibility of a messy debt default by Athens and its exit from the euro zone.

Rajoy, who is trying to balance promises to cut the deficit with attempts not to further strangle the tax-paying base of the economy, said the European Union had to take measures to stem the wider crisis but that Spain must also get its own house in order rather than seek help from the European Central Bank.

BANKING TROUBLES

MADRID, May 16 (Reuters) – Spain faces trouble financing itself as its borrowing costs shoot up, Prime Minister Mariano Rajoy said on Wednesday, underscoring the widening impact of the euro zone crisis sparked by Greece’s political stalemate.

“It’s a difficult and complicated situation. The risk premium has risen a lot and that means that it is difficult to finance yourself at a reasonable price,” Rajoy told reporters in the hallways of Parliament on Wednesday morning.

Spain faces “astronomical” prices to finance itself if it does not do its job cutting its deficit, he later told lawmakers in a weekly parliamentary debate.

Spain’s country risk, as measured by the spread between German and Spanish benchmark bonds, shot up to a euro-era high of more than 500 basis points on Wednesday before relaxing to around 475 basis points.

The higher premium reflects concerns about political turmoil in Greece that could end up in a Greek exit from the euro, as well as fears that Spain, whose economy is in recession, will be unable to reduce its deficit this year to 5.3 percent of gross domestic product.

Spain has issued more than half of the debt it must sell this year, but its borrowing costs have jumped at recent auctions.

“In Spain I believe we are taking the measures we have to take. We must continue cutting public spending,” Rajoy said.

MADRID (Reuters) – Hoping to put an end to a four-year banking crisis, Spain’s government effectively took over Bankia SA (BKIA.MC: Quote, Profile, Research, Stock Buzz), one of the country’s biggest banks, late on Wednesday after days of market anxiety over the lender’s viability.

The centre-right government of Prime Minister Mariano Rajoy told Spaniards the banking sector was safe and said more measures to strengthen ailing lenders would come on Friday.

The sector has already been through three major overhauls since a building and property market crash in 2008, which left lenders with what is now about 184 billion euros ($238 billion) in toxic assets including repossessed housing complexes that stand empty.

Holding 10 percent of deposits in Spain’s banking system, Bankia is by far the largest of eight banks that the government has rescued over recent years.

“Bankia is a solvent entity that continues absolutely normal operations and its clients and depositors have no cause for concern,” the central bank said in a statement.

The public seems to have accepted the government’s assurances and so far there have been no signs of any deposit runs in Spanish banks.

Inside a Bankia branch in Madrid there was a normal flow of about eight clients on Thursday morning. “I’m not worried. I know my money is safe … Maybe people with more money don’t see it that way,” said Fernando Hernando, 42, an interior designer, who was in the bank on regular business.

MADRID/ROME (Reuters) – The election of Francois Hollande in France gives the leaders of struggling southern European countries a new ally in their effort to temper the German-led drive for rigid austerity that has exacerbated their economic woes.

Socialist Hollande’s victory breaks up the centre-right tandem of his predecessor Nicolas Sarkozy and Germany’s Angela Merkel, whose European fiscal pact demanded deep spending cuts in Italy, Spain, Portugal and Greece.

Southern European leaders – including centre-right ones who might have publicly preferred Sarkozy – will cheer the prospect of more time to meet deficit targets and support for proposals such as euro area bonds and coordinated stimulus spending.

In their own election on Sunday, Greek voters abandoned traditional parties from both the left and right that had supported austerity, dealing another hard blow to the Sarkozy-Merkel policies that had become the European consensus.

“The results of the elections in France and Greece impose the need for a reflection on European policies,” Italy’s technocrat Prime Minister Mario Monti said in a statement after speaking with Hollande, Merkel and Britain’s David Cameron.

“Responsible public finance policy is a necessary but certainly not sufficient condition for the key objective: a sustainable growth which can create jobs and produce social equity,” he said. “For this reason, it is fundamental that Europe urgently adopts concrete policies for growth.”

The north-south divide could prove a more compelling force in southern Europe than traditional left-right politics. Spain’s centre-right Prime Minister Mariano Rajoy might have been expected to prefer fellow conservative Sarkozy, but nonetheless stands to gain from the election of a Socialist in Paris.

MADRID (Reuters) – Spain’s Central Bank is consulting with international bankers and property experts on setting up a holding company to value and sell off toxic real estate assets from the country’s troubled financial sector, two sources said on Monday.

The consultation process will last a few weeks, one of the sources, from the central bank, said. “When we have those opinions we will use them for input on the formula for the entity,” the source told Reuters.

Spain’s banks were hit by billions of euros of losses after a decade-long property bubble burst in 2008 and concern about them, and the country’s overspending regional governments, have fanned fears of a new euro zone debt crisis.

It has restructured the financial sector three times, injected some 18 billion euros into the system, taken over five banks and forced banks to recognize steep losses.

But investors are not convinced all the risks have been worked out of the system and Spain’s borrowing costs are hovering around 6 percent, a point below levels deemed unsustainable.

The government is looking at what it calls a liquidation structure — refusing to use the term bad bank — to take toxic assets off the banks’ books.

“Separating the real estate assets from the bank balances is something that makes sense and is positive for the banks from many points of view,” Economy Minister Luis de Guindos said at a news conference on Monday.

MADRID (Reuters) – Spain has threatened to retaliate against Argentina for nationalizing a Spanish energy firm, but Madrid will find it hard to put real pressure on a maverick nation that has been shut out of world debt markets and has ignored international fines in previous disputes.

Argentine President Cristina Fernandez said this week she would fulfill a life-long dream and solve her country’s energy shortage by seizing control of its biggest oil company, YPF, a subsidiary of Spain’s Repsol (REP.MC: Quote, Profile, Research, Stock Buzz).

Madrid immediately threatened economic and diplomatic “consequences”. But given Argentina’s record with international investment and the restrictions on what sort of retaliation Spain can take, the threat may well be hollow.

“The threat really has very little credibility. What measures can they take?” said Jose Ignacio Torreblanca, head of the Madrid office of the European Council on Foreign Relations.

He said Argentina has little investment in Spain, while Spanish companies with investments in Argentina’s highly regulated telecommunications and utilities sectors could suffer if tensions escalate between the two countries.

Spain will ask the European Union to file a complaint with the World Trade Organization against Argentina, a high-ranking government source said on Wednesday, though it may find difficulty winning support from all 27 EU member nations.

Even if it did receive EU backing, such a complaint may not succeed with the WTO, which would want proof that Argentina was acting against public interest by taking control of YPF as laid out in a Spanish-Argentine bilateral investment treaty.

MADRID (Reuters) – Spain has threatened to retaliate against Argentina for nationalizing a Spanish energy firm, but Madrid will find it hard to put pressure on a maverick nation that has been shut out of world debt markets and has ignored international fines in previous disputes.

Argentine President Cristina Fernandez said this week she would fulfill a life-long dream and solve her country’s energy shortage by seizing control of its biggest oil company, YPF, a subsidiary of Spain’s Repsol.

Madrid immediately threatened economic and diplomatic “consequences”. But given Argentina’s record with international investment and the restrictions on what sort of retaliation Spain can take, the threat may well be hollow.

“The threat really has very little credibility. What measures can they take?” said Jose Ignacio Torreblanca, head of the Madrid office of the European Council on Foreign Relations.

He said Argentina has little investment in Spain, while Spanish companies with investments in Argentina’s highly regulated telecommunications and utilities sectors could suffer if tensions escalate between the two countries.

Under Fernandez and her husband and predecessor, the late Nestor Kirchner, Argentina has antagonized investors but still enjoyed strong economic growth and growing employment on the back of high prices for soy beans, its biggest export.

However, persistent investor jitters mean foreign investment in Argentina has fallen behind more business-friendly countries such as Brazil, Chile and Peru.