Three regions request a huge bailout, and a hidden bank run is under way.
Catalunia will tap a national bailout fund after Spain’s most indebted region was shut out of financial markets, suffering the type of funding squeeze that led Greece, Ireland and Portugal to seek international bailouts.
Spain's regional governments have long made it clear that they cannot make it through the year without the help of a central government bailout. Much of the €18bn (£14.2bn) on offer will end up on Spain's eastern Mediterranean coast, with Catalonia, Valencia and Murcia at the front of the queue.
MADRID (MarketWatch) --Spain's economic recession deepened in the second quarter, final data released Tuesday showed, as gross domestic product contracted at a faster pace both on an annual and a quarterly basis amid a steep downturn in domestic spending.
Data from the European Central Bank shows that outflows from Spanish commercial banks reached €74bn (£59bn) in July, twice the previous monthly record. This brings the total deposit loss over the past year to 10.9pc, replicating the pattern seen in Greece as the crisis spread.
It is unclear how much of the deposit loss is capital flight, either to German banks or other safe-haven assets such as London property. The Bank of Spain said the fall is distorted by the July effect of tax payments and by the expiry of securitised funds.
Julian Callow from Barclays Capital said the deposit loss is €65bn even when adjusted for the season: “This is highly significant. Deposit outflows are clearly picking up and the balance sheet of the Spanish banking system is contracting.”