The Sickness Spreads - Spain Asks for Huge Bailout

Spain appears to be the next eurozone country to go under.

Standard & Poor’s just slashed the credit ratings of Spain's top five banks after previously downgrading ratings on 11 Spanish banks back in late April. Moody's followed suit soon after.

Bankia, one of Spain's largest banks that was partially nationalized recently after a 4.5 billion euro bail out has asked the Spanish government for a further 19 billion euro ( $24 billion). One in ten bank accounts in Spain are in Bankia. It's an open question whether Spain can afford to bail out Bankia...or whether it can risk the social unrest that would come form letting it tank.

Bankia's rating was cut to BB+, one notch into junk status, from BBB-, while another bank BFA, which was already in junk status, was cut to B+, four notches into junk territory, from BB-.

Aside from an out of hand welfare state glommed onto by thousands of immigrants from North Africa and the Arab world, Spain has a serious problem with more prosperous regions like Catalonia being called on to fund poorer areas .

And Catalonia has just told Madrid that it is running out of cash.

Spain's big ace in the hole was that it had done a reasonable job selling its debt thus far, about half of what the country will need for 2012. But now Catalonia, by far Spain's most properous region has informed Madrid that it needs help from the central government because it's running out of options for refinancing any more debt for this year.

Meanwhile, its highly indebted regional governments face 36 billion euros of debt refinancing bills this year, far above the previously stated 8 billion.

Will Spain go to the IMF and/or eurozone's rescue fund to make up the difference? And will German taxpayers be willing to stick their hands in their pockets again?

Stay tuned...