Troubled Spanish Bank Is Part-Nationalised
One of Spain's largest banks has been part-nationalised as lenders continue to reel from the bursting of the property market bubble.
The state will take a 45% stake in Bankia, a lender which has the industry's largest exposure to toxic property assets.
The bank - Spain's fourth largest - was created only two years ago from a merger of seven struggling savings banks.
It will have a 4.47bn euro (£3.59bn) loan by the Spanish bailout fund converted into shares, owned by the state.
Bankia holds 32bn euros (£25.7bn) in distressed property assets. On Monday, the bank's executive chairman, Rodrigo Rato, resigned.
"It is a necessary first step to ensure solvency, the tranquility of the depositors and to dispel the doubts of the markets on the capital needs of the entity," Spain's finance ministry said.
Earlier, prime minister Mariano Rajoy failed to answer questions about nationalisation but said a slew of banking reforms later this week would "help solve a lot of Spain's problems".
His words came as jitters about banks drove the Madrid stock market to an eight-year low on Wednesday.
Following the nationalisation of Bankia, Spanish share prices soared, lifted by the financial sector and optimism that the government was determined to clean up bank balance sheets.
Spain, which has suffered a second recession in three years and is experiencing unemployment of 24%, is seen as a big worry in the troubled eurozone.
:: Meanwhile, Ladbrokes have suspended betting on Greece, the eurozone's most crisis-hit country, making an exit from the euro.
While all signs point to debt-laden Greece returning to the polls after a mainstream party failed to win an outright majority at the weekend's elections, the bookmaker has temporarily suspended all bets on a return to the Drachma this year.
Just before suspension, the odds of a Greek eurozone exit were slashed to 1/3.
Alex Donohue of Ladbrokes said: "The book remains closed while discussions continue.
"We'd slashed the odds repeatedly until then as punters continue to bank on a Greek exit."
Greek Socialist leader Evangelos Venizelos was making a last-ditch attempt on Thursday to form a government and avoid a new general election.
With pro-bailout and radical austerity parties rejected by voters last weekend, Greece is facing the suspension of international loans and eventual bankrupcy.
To add to Greece's woes, new figures have revealed unemployment reached a record 21.7% in February.
Nearly 1.1 million are now out of a job, including 54% of young people.