After Greece, Ireland and Portugal, Spain is the fourth country of the euro area to ask for a loan from the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), which comes into force next month. The amount of money needed to rescue weak banking sector in Spain has not been negotiated yet, but the European finance ministers agreed to lend Madrid up to 100 billion euros.

The final decision about the exact amount will be taken after the completion of two main audits of Spanish banks at the end of June. The banking sector will be the biggest recipient of the loan, as it is struggling with liquidity problems after the collapse of property boom in recent years. Compared to previous loan seekers, Spain will probably be granted a loan with no strings attached to its budget cuts or reforms. This would be an unprecedented step made by the European authorities and as BBC business editor Robert Peston says, “Ireland would have a powerful case for demanding a renegotiation of its bailout package”.

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