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Spain prosecutors open probe into nationalized bank

Spain's public prosecutor's anti-corruption unit on Wednesday began its investigation against Bankia [corporate website, in Spanish] to determine whether there is sufficient ground to take penal action against the nationalized company. This measure was initiated after public outrage against the government over its handling of the listing and nationalization of the bank last year and last month, respectively. Protesters from the "indignados" [advocacy website] movement announced that it will take civil and criminal legal action against the bank and its former chairman on June 14 and that they have already raised 15,000 euros. The bank found itself in financial crisis and asked [Telegraph report] the government last month for a bail-out in the amount of 19 billion euros (USD $24 billion). The bank engaged in crowd funding, a method to raise money by drawing cash from ordinary citizens. Over 500 minority investors, most of whom were attracted to invest by the bank's last July's drawing and who suffered financial losses because of the fall of the bank's stock prices, are seeking to start preparing next week for a class action against the bank for compensation.

Also Wednesday the European Commission [official website] announced [JURIST report] a proposal that would address the problems of bailing out large banks with public funds during financial crises in the future. The 171-page proposal is a response to the financial crisis of 2008 in which the European public authorities, including Spain, had to bail out large financial institutions, leading the European Commission to approve 4.5 trillion euros (equivalent to 37 percent of EU GDP) to go to those failing companies. Several EU member states face financial instability which may have detrimental effects on other member states. Earlier this month, Ireland voters approved [JURIST report] the Treaty on Stability, Coordination and Governance [text, PDF] aimed at improving fiscal discipline and promoting greater financial information disclosure between EU member states because of its current financial situation. Similarly, Spain's major political parties reached an agreement [JURIST report] in last August to modify the country's constitution that was to regulate the limits of the national deficit in order to avoid risks of debt crisis and a bailout.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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