MADRID (Reuters) - Spain will recapitalize nationalized lender Bankia
"There is a clear preference to tap the market. The other option (injecting state bonds directly into Bankia) is marginal," the source said.
"The (bank restructuring fund) FROB has liquidity and can tap the market. The Treasury also has a strong liquidity position. We'll choose one or the other mechanism."
The source also said the government would task the Treasury with issuing and distributing debt to the regions, under strict conditions of meeting deficit targets and implementing austerity plans.
(Reporting by Julien Toyer; Editing by Sonya Dowsett)