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In Spain, public distrust feeds economic meltdown

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That pessimism is feeding back to the political class, which Spaniards cited in the survey as the most pressing problem after unemployment and the economy. Concerns about corruption and fraud are also rising, with 9 percent of Spaniards giving top billing to that.

"We thought we were a rich country and institutionally stable. The crisis has highlighted that is not the case," Dr. Myro says. "The difference between what we thought we were and what we are is political, economic, and institutional."

The unraveling of Bankia

Spain's plight is not over unsustainable debt levels or unwillingness to implement the necessary economic reforms, as in Greece. It already secured most of its credit obligations this year and implemented painful austerity measures.

Instead, the problem is citizens' plummeting trust in Spanish institutions. A catalyst was the botched government takeover of Bankia, formerly the country's third-biggest bank. It was formed by a 2010 merger of seven savings banks, most of them indirectly controlled by the conservative Popular Party currently in power.

In his inaugural speech in December, Mr. Rajoy said the nation's troubled banks wouldn't need a bailout – a message he stood by until May 9, when the government abruptly nationalized Bankia, which subsequently revealed it would need €24 billion ($30 billion) to recapitalize.

For the next month, the government denied the banks would need a European rescue, but didn't say where it would get the money to save Bankia and the rest of the sector. Meanwhile, the International Monetary Fund announced that by its estimates, Spain would need at least €40 billion ($50 billion) to keep banks afloat.

Finally, on June 9, the EU offered Spain up to €100 billion – about 10 percent of its gross domestic product.

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