To ward off formal bankruptcy, recently nationalized Bankia, Spain's fourth largest bank with 10 million clients and 20,000 workers, was just promised an additional 19 billion euro bailout by the Spanish government, bringing its total bailout (so far) to 23.5 billion. That amount, incidentally, is four times the size of the government's annual budget for scientific research.
But there's a minor glitch: The Spanish government's bank bailout fund that was established to handle such contingencies, the FROB, doesn't have the money. After all its earlier bailouts, the FROB now has a grand total of 5.4 billion in its coffers, of which 1 billion is already committed to the Banco de Valencia. So it is short a mere 14.6 billion. Oops.
The last thing the Spanish government wants to do at this point is to have the FROB try to borrow more money on the international markets, because they fear a total failure, which would force the entire bailout of the Spanish banks onto EU funds—which means Spain would immediately be subject to the Greek treatment.
So, instead, the Spanish government has decided to bail out Bankia with 19 billion euros in government bonds, which Bankia can then use as capital assets. This is backdoor money printing by another name. And the whole sham will blow up in the government's face the second Bankia needs to make those bonds liquid... if not earlier.
It turns out that the Spanish government has been planning for this move for many weeks, but that the issue was called by the Bankia blowout. In fact, the government believes it can get away with issuing up to 60 billion euros in such funny money, to recapitalize the entire Spanish banking sector.
As for Bankia itself, it turns out that the 19 billion gun-to-the-head demand it made on the Spanish government, comes from the fact that the bank discovered that it actually had 13 billion euros more in toxic assets than it had previously realized/admitted, 9.7 billion of which is in the real estate sector. So that now brings the total bad debt on Bankia's books to 40 billion euros.