With the plight of Spain’s banks today’s unhappy center of euro zone attention, the Guardian provides some background:

[T]he scramble to rescue Bankia has shed light on Spain’s own version of toxic debt – the vast amount of money loaned to builders, developers and land speculators during a decade-long property boom…It is now clear that Spain’s bubble was imploding even as it was being praised for its handling of the 2008 crisis.
The slowdown in construction was already lengthening the dole queues and between 500,000 and 900,000 unsold new homes were on the market. By the end of 2008, it was apparent that Spain’s biggest financial risk lay in the close relationship between local savings banks, the politicians who controlled them and the property developers who paid handsome local taxes.

And, yes, there are some obvious parallels with Ireland in the involvement of politicians, in the way that the operation of the single currency muffled price signals that might have otherwise have sounded the alarm (although in a better world common sense would have been enough), and in the way that government finances were boosted by the boom. On the face of it, both Ireland and Spain showed better budgetary discipline than Germany for quite a long stretch in the 2000s. The problem was that those supposedly prudent budgets received a great deal of assistance from the fruits of a great deal of imprudence. And that was not sustainable.

But back to the Guardian:

At that stage [2008], with much building land illiquid, there were clear signs of coming disaster. Some 430,000 new homes had been built in the first eight months of 2008 alone – one for every 100 Spaniards.
Rather than own up to losses, Spanish banks chose to roll over loans or allow developers to finish building so that they could take properties instead. Many then left their portfolios of apartment blocks, housing estates and land unsold while giving them unrealistic book values that hid the scale of the problem…
The new government, headed by conservative prime minister Mariano Rajoy, has put pressure on the banks to own up to the scale of their toxic property loans.
Bankia – a 17-month-old conglomeration of seven regional savings banks from areas mostly run by Rajoy’s People’s party – floated in July and most shares were sold to ordinary Spaniards, who were told this was the “best of the new banks” and who now face large losses.
Rather than gaining strength through size, Bankia became a sick giant with nearly €32bn of problem real-estate assets at the end of 2011. The €4.5bn in government loans given to Bankia over the past two years – which, the government announced on Wednesday, will be turned into shares to give the state 45% of the equity – is expected to be only the tip of the iceberg. The bill for Bankia alone could reach €15bn.

And so it goes on.