Spain is to ask for a bank bailout from the euro zone, becoming the fourth and largest country to seek help since the single currency union’s debt crisis began.
Economy minister Luis de Guindos said the aid will go to the banking sector only and thus does 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, although two senior EU sources said today it could be as much as €100 billion, compsared to previous estimates of €40 billion.
Mr de Guindos told a news conference in Madrid that it was not yet clear which European bailout structure would be used, whether the European Financial Stability Facility or the European Stability Mechanism.
"The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it," Mr de Guindos said.
He said the amounts needed would be manageable, and that the funds requested would amply cover any needs.
The International Monetary Fund will have role only as an adviser, he said.
Spain's banks incurred huge losses in a property crash similar to that in Ireland, and the Spanish government has neither the money nor the borrowing power to prop them up on its own.
Euro zone finance ministers held an emergency teleconference this afternoon, following indications from Madrid that an application for a bailout may be imminent.
A spokesman for Luxembourg prime minister Jean-Claude Juncker, who chairs the meetings of finance ministers, said the conference call ended this afternoon. "There will have to be a quick solution," Mr Juncker told German radio before the teleconference began.
Asked if he expected Spain to request help, Swedish prime minister Fredrik Reinfeldt told public service radio: "I think that is everybody's assessment. There is even talk about amounts up to €80 billion."
Spain has made several attempts to settle its banking problem but loan losses were badly underestimated in each previous plan. Germany has already ruled out the provision of direct aid to the Spanish banks from the permanent ESM.
Spain pursued that notion in recent weeks in the hope the money would not go on to its national debt. This led to anticipation in Government circles that Ireland might eventually receive similar terms.
The development follows EU-International Monetary Fund rescue programmes for Ireland, Greece and Portugal. Cyprus may also require a bailout this summer to deal with losses in its banking system.
The request from Spain comes ahead of the general election in Greece tomorrow week, a poll that could result in that country leaving the euro.
Some officials working on the Spanish rescue plan said there was concern to provide certainty over its financial position in the event that the Greek election prompted a sudden outburst of turmoil on markets.
Intensive preparations for a loan plan for Spain came in spite of official denials from Madrid and Brussels that any such work was under way. After plans for the ministers' meeting were revealed yesterday, the Spanish government circulated the finance ministries all euro zone countries with a note emphasising no aid application had been made.
Additional reporting: Agencies