Spanish bank stocks tumbled Friday as the government readied drastic reforms to save their balance sheets, two days after nationalising the fourth-biggest bank, Bankia. Prime Minister Mariano Rajoy met with his ministers to adopt the broad reforms, expected to bring to light the financial sector\'s massive exposure to the collapsed property sector. Market doubts about the full extent of the losses on bad loans in Spain\'s banks, which overextended themselves during a property boom that went bust in 2008, hurt the shares of even the strongest banks. By late morning, Santander, the eurozone\'s biggest bank by capital, had slumped 2.97 percent to 4.774 euros, number-two BBVA slid 2.62 percent to 5.171 euros and Banco Popular skidded 3.75 percent to 2.08 euros. Bankia, in which the state is taking a 45-percent stake as a crisis measure to save it from crippling bad loans, fell 2.14 percent to 2.06 euros, bringing losses this week to 16.26 percent. Created from a merger of seven savings banks, Bankia had 37.5 billion euros in exposure to the property sector at the end of 2011, of which 31.8 billion euros were classed as problematic. But the hangover from the property party extends across the financial sector. Bank of Spain figures show commercial banks held problematic real estate assets including loans and seized property of 184 billion euros, 60 percent of their property portfolio at the end of 2011. \"The general feeling is that Spanish banks have worse problems than previously thought,\" said Edward Hugh, an independent economist based in Barcelona. In an attempt to soothe markets, the government has said it will approve a reform enabling banks to transfer problem loans to separate agencies. But it has said this will be done without using state money. \"What we want is to fix the real price of homes (held by the banks) even if everyone loses money, the developers as well as the banks, and that we put them on sale,\" Rajoy said this week. The second plank of the reform will be a requirement that banks boost a financial cushion against the threat of losses in their property assets, the Economy Ministry has said. The new requirement could amount to 35 billion euros, said business daily Cinco Dias. That is in addition to the 53.8 billion euros in provisions already demanded in a reform announced in February. Rajoy\'s conservative government had instilled markets with a brief dose of confidence by stepping into Bankia, performing a U-turn on its refusal to spend public money to rescue banks. The government would take control stake by converting a state-backed loan of 4.465 billion euros ($5.8 billion) into shares in the bank\'s parent company, and it reportedly may boost the total investment to 7-10 billion euros. But the transaction, announced late Wednesday, has also refocussed attention on the Spanish banks\' problems, and the potential costs to a conservative government determined to slash spending. Rajoy said this week the banking intervention would not affect the annual public deficit, which has vowed to slash from 8.5 percent of economic output last year to 5.3 percent this year and 3.0 percent in 2013. The European Union has already discounted Spain\'s promise to trim the deficit in a time of recession and with an unemployment rate in the first quarter of 24.4 percent. In a report Friday, the European Commission said Spain would miss its 2012 and 2013 public deficit targets and the country will remain in recession through 2013. The deficit will reach 6.4 percent this year, way off the government\'s 5.3-percent target, and 6.3 percent in 2013, while the economy will shrink by 1.8 percent this year and 0.3 percent in 2013, it said.