The rescue of Spain's crippled banks took a big step forward Wednesday when Brussels gave a green light for a big slice of rescue aid in a crisis shake-up that Bankia said would cost it 6,000 jobs.
European banking stocks plunged after the announcement by Bankia, the giant that sparked a 100-billion-euro bailout for Spain's banks by the eurozone, but the world's emergency lender the IMF said the sector overhaul was "on track".
The Bank of Spain meanwhile said the country appeared stuck in a job-killing recession in the fourth quarter, four years after the collapse of the real estate boom that brought low banks and the broader economy.
The European Commission cleared the restructuring of four Spanish banks -- Bankia, Novagalicia, CatalunyaCaixa and Banco de Valencia -- paving the way for Spain to receive 37 billion euros ($48 billion) of aid next month.
The Spanish government had stepped in to save Bankia with a 20-billion-euro bailout in May, and soon had to seek the rescue line of up to 100 billion euros from its eurozone partners as the whole sector wobbled.
The Commission said the restructuring of the four banks "will allow them to become viable in the long-term without continued state support".
As part of the plan, Banco de Valencia will be sold and integrated into CaixaBank. The other three will see their balance sheets shrink by more than 60 percent by 2017 compared with 2010.
"Restoring a healthier financial sector capable of financing the real economy is indispensable for economic recovery in Spain," EU Competition Commissioner Joaquin Almunia said.
Bankia is set to get 18 billion euros of the latest funds. NovaGalicia will get 5.5 billion euros of the payment, CatalunyaCaixa 9.0 billion euros and Banco de Valencia 4.5 billion euros.
Combined with previous aid from the Spanish government, Bankia will have received about 36 billion euros, NovaGalicia 10 billion, CatalunyaCaixa 14 billion and Banca de Valencia 7.0 billion -- 67 billion euros in all.
The added debt involved in the banking rescue had fuelled concern that Madrid may need a full sovereign bailout, but Prime Minister Mariano Rajoy has resisted pressure to ask for further help and those fears have eased.
Bankia said after the EU announcement that it would cut 6,000 jobs -- 28 percent of its staff -- by 2015 and close 39 percent of its branches. It aimed to return to profit in 2013 but forecast a loss of 19 billion euros this year.
It also said it would have to sell stakes it holds in some major Spanish companies such as airline Iberia and insurance giant Mapfre.
Bankia's stocks plunged by more than nine percent to close at 0.96 euros on the Madrid stock market. Among other banks, Santander fell by 0.28 percent and BBVA by 0.97 percent.
The main IBEX-35 stock index closed 0.33 percent lower but Europe's main markets were higher.
The IMF said the bank restructuring was "on track" but "the most challenging steps lie ahead" as Spain must implement its plan and launch its "bad bank" to manage 45 billion euros of rotten assets, mostly linked to real estate.
It warned in a report that the end-November deadline for this body to be up and running was "ambitious" and warned of "further headwinds" facing the economy in recession.
The Bank of Spain said in a monthly report Wednesday that the country's economy, the fourth-biggest in the eurozone, would continue shrinking in the final months of 2012.
Even with Spain in recession for the past year, the right-leaning government has pushed on with sweeping austerity measures in the teeth of rising street protests.
More than one in four workers is unemployed and the government is forecasting a contraction of at least 1.5 percent this year.