Audit Shows Spain's Bankia Short 3.5 Billion Euros; PP says "We Must Help Bankia, It Has Deposits for 10% of GDP"

I am piecing together a story of fraud and corruption involving the highest levels of Spanish government. My unnamed sources think it could bring down Prime Minister Mariano Rajoy. However, the news articles I have (primarily in Spanish) are particularly choppy. The brief background story is "black money" (under the table fraud or bribes) was paid monthly to top Partido Popular (PP) party leaders.

When Spanish bonds traded at yields above 7% last Summer, the world's central banks went into a whirlwind to proclaim that these levels did not represent reality (in spite of the depression-era style economic data the nation was spewing). Fast forward nine months, the data is worse and getting worserer but yields - through the guiding hand of Draghi, the self-referential buying of domestic banks, and the BoJ's risk-is-no-object reach for anything non-JPY denominated - have crushed to 4.3% pre-crisis levels.

Courtesy of Google Translate please consider Bank of Spain inspecto

Inquiring minds are interested in the recapitalization plans for the Bankia. Please consider this chain of posts. ABC News reports Spain's Bankia set for massive bailout. Spain's fourth-biggest bank Bankia says it is certain of securing the 19 billion euros ($24 billion) in state aid it is seeking in the largest bank bailout in the country's history.

The implosion in Spanish banks continues. On Wednesday, Spain nationalized BFA, the 8th nationalization since the start of the crisis. After sinking 3 billion into CatalunyaCaixa, Spain tried to privatize the mess but there were no offers at zero euros. Clearly CatalunyaCaixa bank is worth less than zero. Meanwhile Der Spiegel reports "Bundesbank has no idea of what is happening in Spanish banks". Mish readers do. The Spanish banking system is without a doubt bankrupt. Let's take a look at half a dozen articles courtesy of Google Translate.

EU officials have hatched a plan to make banks and bondholders take losses for risks, not now of course, but after 2013. In the meantime, taxpayers will shoulder 100% of the losses for bank lending stupidity. On this confidence inspiring news, European bonds rallied sharply. Bloomberg reports EU Bank Writedown to Exclude Pre-’13 Debt

ECB Says Bond-Buying Program Available The ECB went from loading up on sovereign debt and making a huge mess of it when Greece defaulted, to the LTRO program which has not made a big mess yet but will. Things are about to go full-circle as the ECB threatens once again to make another mess of things with sovereign bond purchases. The Bundesbank, Germany's central bank protested bond purchases the last time (correctly), and will do so again, likely to no avail, and with the same predictable results.

Some rather shocking delinquency numbers (to mainstream media readers but not readers of Mish, Acting Man, Zero Hedge, Max Keiser, the Slog etc.) have surfaced in Spain. Courtesy of Google Translate please consider The default property is multiplied by ten since 2008.