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Capital flight from Spain gathered pace in May with the rescue of one of the country's biggest banks, and crumbling consumer demand saw retail sales chalk up two straight years of declines in June.
Outflows rose to 41.3 billion euros ($50.6 billion), Bank of Spain data showed on Tuesday, as the government stepped in to prop up Bankia.
That dealt a further blow to already fragile investor confidence and triggered a European rescue worth up to 100 billion euros for the country's lenders.
In all 163 billion euros - equivalent to around 16 percent of economic output - left Spain between January and May, with domestic banks sending money abroad, foreign banks pulling out cash and mostly non-resident investors dumping domestic assets.
Spain's struggling economy, which is expected to remain in recession well into next year, is at the center of the euro zone debt crisis, and rising refinancing costs risk shutting the country out of international markets.
Domestic demand has stalled since the crisis started four years ago, hitting the key service sector which accounts for around 70 percent of the economy, while sky-high unemployment rates have further eroded consumer confidence.
Spanish retail sales fell by 5.2 percent year-on-year on a calendar-adjusted basis in June, separate data showed on Tuesday, marking a 24th straight month of declines.
"These figures are proof that the Spanish economy continues in recession and a drop in retail sales could indicate a GDP contraction of around 2 percent this year," economist at Madrid broker M&G Valores Nicolas Lopez said.
"For the moment there's no sign this is going to change in the medium term."
Madrid requested help from Europe in June to recapitalize its banks, battered by the collapse of a decade-long real estate bubble in 2008, but the plan failed to calm investors for more than a few days.
Tuesday's data showed domestic banks moved 31.9 billion euros out of the country in May. The headline figure compared with total outflows of 26.6 billion euros in April and a peak of 66 billion euros in March.
The premium investors pay to buy Spanish over German debt was at around 532 basis points on Tuesday, far below last week's euro-era highs on hopes the European Central Bank will announce measures to help the beleaguered market.
Trade gap narrows
Plummeting domestic demand was reflected in May current account data also published on Tuesday by the central bank and showing a deficit of 754 million euros, narrowing sharply from 3.4 billion euros in the same month of 2011.
The gap shrank on a lower trade deficit as exports rose against falling imports, and a lower primary income deficit - the difference between money paid abroad and money received.
The trade deficit stood at 1.5 billion euros in May, down from 3 billion euros a year earlier, as exports rose 5.5 percent while imports dropped 2.1 percent. The primary income surplus fell to 1.9 billion euros from 3.1 billion euros.
The government, which expects the economy to shrink 1.5 percent this year and 0.5 percent in 2013, has passed some of the deepest budget cuts in decades to deflate one of the euro zone's largest budget deficits.
Tax hikes, including a 3 point rise in value-added tax, are expected to further dent high street spending.
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