Spain will ask for a bank bailout from Europe, becoming the fourth and largest country to seek help since the single currency bloc's debt crisis erupted.
Economy Minister Luis de Guindos said Saturday the aid will go to the banking sector only and so would not come with new austerity conditions attached for the economy in general.
He gave no figure as to how much Spain will request, saying that he would wait until independent audits of the country's banking sector have been carried out before asking for a specific amount.
De Guindos did say, however, that Spain would request enough money for recapitalization, plus a safety margin that will be "significant."
The money will be funneled through an existing bailout fund called the FROB.
De Guindos said that with markets in turmoil, the government's efforts so far to shore up the financial sector — through new provisioning requirements — "Must be completed with the necessary resources to finance the needs of recapitalization."
"Therefore, the Spanish government states its intention to request European financing for the recapitalization of banks that need it," the minister told a press conference after a videoconference with colleagues from the 17-member eurozone.
Amount of bailout unclear
A statement issued after that meeting said up to €100 billion ($129 billion) would be made available to Spain.
The Spanish acceptance of aid for its banks is a big embarrassment for Prime Minister Mariano Rajoy, who said just 10 days ago firmly that the banking sector would not need a bailout.
"It's absolutely imperative that Spain receives a bailout very quickly because confidence is ebbing. It's sagging away in the banking system as a whole," Global markets analyst Patrick Young told CBC News.
Bankia, Spain's fourth-largest bank, "was sold on the stock market by the government just a couple of years ago, and it was sold to retail investors, and they've lost 75 per cent of their money," Young said.
"Investors are feeling very sore. They're lacking confidence."
Bankia was crippled after a real estate bubble bust four years ago. Housing prices were tripling and quadrupling over the last decade, while banks fed the market with low interest rates.