Spain’s troubled financial giant, Bankia, on the verge of collapse

In a troubling sign that threatens to exacerbate the recession currently haunting the European Union, a major banking organization based in Spain recently reported that it was virtually insolvent and may require additional bailout funds to stay afloat.

The problems began this week when Bankia, which was once a multinational banking conglomerate spanning Spain, France and Belgium, announced that its portfolio of commercial and retail loans were performing far worse than previous reported and that its level of "negative equity" had reached 4.2 billion euros.

As part of its efforts to regain its financial position, the bank stated that it would be forcing shareholders – many of whom are Spanish citizens – to accept significant losses on their investments. A similar tactic was used during Ireland's bond crisis in 2011, when holders of domestic bank debt were financially wiped out.

According to Reuters, both everyday Spaniards as well as bond markets are responding  negatively to the revelations. On Thusrday, December 27, Bankia's market value plunged nearly 20 percent to a paltry 0.55 euros, a catastrophic drop that has surely made its position that much more untenable. Speaking to the source, an anonymous economist with connections to the Bank of Spain, the country's central bank, commented that the underlying issues – underperforming loans and the ineffectiveness of bailout funds –  will continue to get worse.

"Are we looking into leaving shareholders with something? Yes. How much? That's too soon to say. Will it be very little? For sure," the source told Reuters. "But that will be purely symbolic. I can assure you they will lose up to the shirt on their back."

These developments could severely disrupt the slow recovery taking place in the European Union. It's especially concerning for those who are invested in international markets, as volatility in one place may lead to problems elsewhere. If you're someone who is preparing for retirement or is simply trying to safeguard their portfolio, you should visit today and download your own "Free Game Plan Report."