WRAPUP 1-Spain bonds slump on weak data, bank concerns, strike

* Spain bond spreads at 11-day high

* Concerns over banks as ECB funding expires

* Retail sales fall for second month after brief March rise

* Metro strike against austerity measures hits Madrid

By Nigel Davies

MADRID, June 29 (Reuters) - Spanish bonds were hit on Tuesday by poor retail sales data and concerns the country's banks could run into funding problems when a European Central Bank refinancing programme expires this week.

Madrid's Metro workers walked off the job for a second day to protest against austerity measures aimed at getting the deficit under control as markets fret the euro zone's No. 4 economy could be heading for a Greek-style debt crisis.

Spain's risk premium, measured by the spread between the 10-year government bond ES10YT=TWEB and German bund DE10YT=TWEB, rose in morning trade to an 11-day high of 208 basis points, not far from the record 238 bps in mid-June.

While the ECB loan expiry applies to banks throughout the euro zone, peripheral countries such as Spain were being watched the most closely over concern their banks, especially smaller ones, would face the toughest problems getting new financing.

"The rise in the spread is basically due to a widespread worry in Europe over the financing of the 442 billion euros that banks have to return to the ECB," said Nicolas Lopez, director of markets and analysis at M&G Valores.

The ECB's first one-year loans -- part of the emergency support it put in place at the height of the financial crisis -- expire on Thursday and are not set to be renewed, although the ECB has padded the date with extra borrowing opportunities.

Spanish banks have made active use of ECB funding after being locked out of other lending markets because of concerns about their exposure to sovereign debt, among other things.

Speaking on national radio, Economy Minister Elena Salgado called for the ECB to be aware of the needs of Spanish banks.

She urged the publication of stress tests on European banks as soon as possible to help battle the market's perception of Spanish assets.

"I think we are in a position to point out the strength of the Spanish financial system and we'll show it even more when the stress tests are published," she said.

Spain's bond prices reflected a wider euro zone slide as the common currency fell to a lifetime low against the Swiss franc and a 1-1/2-year trough versus sterling on Tuesday on concerns over the ECB refinancing programme expiry.

RETAIL SALES IN MAY

Weak electronics and food sales pulled down retail sales by 1.9 percent year-on-year in May after falling by a revised 2.4 percent in April. Sales had risen in March for the first time since November 2007.

Weak sales data could put in doubt government forecasts for the economy to grow in each quarter this year after exiting recession feebly in the first three months. The Economy Minister said those forecasts still stood, however.

"We have not changed our forecast, there will not be a negative quarterly figure this year," she said.

Economists had more doubts.

"We believe the record drop in consumer confidence in May, coupled with the rise in VAT rate in July, spells very bad news for consumer spending in the second half of 2010, already under pressure with the phasing out of the car scrappage scheme," said Raj Badiani, an economist at IHS Global Insight consulting firm.

"This could be an important factor in dragging Spain back into a technical recession by the end of 2010," he said.

Commuters in Madrid struggled to get to work on Tuesday as workers on the capital's subway system ramped up their protest on the second day of a three-day strike.

A general strike in the manufacturing-heavy Basque region of northern Spain on Tuesday hit steel, car and tire factories as well as other businesses. Protesters trying to block entrances to shops clashed with police in the city of Bilbao.

The labour actions were seen as a prelude to a general strike scheduled for Sept. 29 to protest against the 15 billion euro austerity package which will slash civil servants wages by at least 5 percent.

Protests against various government measures including austerity and labour reform have remained relatively muted. (Additional reporting by Judy MacInnes, Manolo Ruiz, editing by Fiona Ortiz and Sonya Hepinstall)