Bankia, the nationalized Spanish bank which had to reassure savers last week to fend off a reported run on its deposits, needs to strengthen its capital defenses by as much as €7.5 billion ($9.56 billion), the country's economy minister said Monday.

The minister, Luis de Guindos, said Bankia needed to find around €7 billion to €7.5 billion to meet the Spanish government's new provisioning requirements designed to strengthen the country's banking industry against further economic shocks. If Bankia cannot raise the money itself, it will have to tap the state bank rescue fund, FROB. This could increase the government's bill for keeping Bankia afloat to €12 billion.

Like other banks, Bankia has until June 11 to tell the government how it plans to come up with the money for stronger defenses.

De Guindos Monday also dismissed comments from the new French President Francois Hollande that Spain's banks might need money from European recapitalization funds to stay in business. The minister said Hollande "probably knows the French banking sector better than the Spanish one."

Spain is in the eye of the storm of the eurozone debt crisis amid worries that its banks are overexposed to an imploded real estate bubble and the government, already fighting recession and a nearly 25 percent jobless rate, could not afford to bail them out if it needed to. A major concern is that bank failures might swamp public finances and that the government will be unable to carry through its austerity measures and reforms.

The government has introduced the raft of harsh cutbacks aimed at slashing its deficit from 8.9 percent of economic output to below the maximum level set by the European Union of 3 percent by 2013. For this year, the goal is 5.3 percent.

The interest rate of Spain's benchmark ten-year bond, which can be used as a measure of investor confidence, was up a further 0.03 percentage point to 6.23 percent Monday — anything above 7 percent is widely-considered to be unsustainable in the long-run.

Spain has essentially taken over Bankia by turning a €4.5 billion aid injection made in 2010 into shares in Bankia's parent company. Many Spanish lenders are heavily exposed to Spain's imploded real estate bubble, and Bankia — the result of a merger of seven savings banks — is the worst off of all, with €32 billion in toxic assets.

Last week Bankia had to fend off a newspaper report that its savers were rushing to withdraw their funds since the bank was taken over by the government. Its shares dropped as much as 27 per cent on Thursday, before recovering the following day. Bankia's shares were down 0.8 per cent in afternoon trading Monday at €1.74.

De Guindos' ministry also announced Monday that two independent consulting firms have been hired to carry out stress tests of Spanish banks. They are Oliver Wyman and Roland Berger Strategy Consultants GmbH. They are to start work immediately and finish and file a report in the second half of June.

The ministry said the goal of this is to "increase transparency and clear away once and for all" doubts about the assets held by Spanish banks.

In a second phase of this operation, three auditing companies will be hired by the end of May to evaluate how banks are assessing the quality of their assets and making provisions for them, the ministry said in a statement. This process will take longer and the results of the studies will be known "in the next few months."

De Guindos was speaking following the announcement by the Spanish government late Friday that Spain's 2011 budget deficit was higher than expected — the second upward revision in recent months. The minister said the increase in the 2011 deficit figure from 8.5 percent of national income to 8.9 percent was due to overspending by four regions, which had not been "totally transparent" in providing figures initially.

The minister also said the Spanish economy, which has contracted by 0.3 percent in each of the past two quarters, will shrink by about the same amount in the second quarter of 2012. The forecast is for it to decline 1.7 percent for the year.