Euro zone finance ministers have agreed to lend Spain up to €100 billion to shore up its teetering banking system, the Irish Times reported. Madrid said it would specify precisely how much it needs once independent audits report in just over a week. After a conference call of the 17 finance ministers yesterday afternoon, which several sources described as heated, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts.

German chancellor Angela Merkel said Europe was ready to act to ensure stability in the euro zone as Spain's credit rating was cut by three notches today amid expectations it may soon seek EU help for banks beset by bad debts, the Irish Times reported. Spanish prime minister Mariano Rajoy said he would wait for the results of independent audits of the banking system before talking with Europe about how to recapitalise troubled lenders. An International Monetary Fund report due out next Monday is expected to show Spanish banks need at least €40 billion, financial sector sources said.

Spain has made its most explicit call to date for European institutions to recapitalise the country’s banks amid concerns about its own ability to raise the billions of euros needed on sovereign bond markets, the Financial Times reported. Cristóbal Montoro, budget minister in the centre-right government, sent jitters through financial markets on Tuesday when he admitted that the high perceived risk of Spanish sovereign debt meant Spain “does not have the door to the markets open”.

European Union and French officials squared off against Germany on Monday over how best to help Spain’s ailing banks, drawing lines in the debate over the latest challenge to the euro zone, the International Herald Tribune reported. Olli Rehn, the European commissioner for economic and monetary affairs, and Pierre Moscovici, the French finance minister, offered cautious endorsement at a news conference in Brussels for the idea of letting Europe’s bailout funds inject money directly into troubled banks.

Madrid will regret refusing a front-door bailout. The straightforward way of dealing with Spain’s banking problem would be for the government to borrow 50 to 100 billion euros from the European Financial Stability Facility (EFSF) or the soon-to-be-created European Stability Mechanism (ESM), and inject that money into the banks. But Mariano Rajoy, the country’s prime minister, continues to deny publicly that the country needs such a rescue, Reuters reported in a Breakingviews commentary. There are probably two reasons.

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut, Reuters reported. Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout.

The European Union pressed Spain on Thursday to urgently clear up doubts over its mammoth rescue of stricken lender Bankia so as to calm investors fearing a financial breakdown, Agence France-Presse reported. As investors exited Spanish government bonds and stocks, the bloc called on Madrid to provide details of its bailout of Bankia. Bankia is asking the state for 19 billion euros ($24 billion) to repair its books, in addition to 4.5 billion euros already injected, the biggest rescue in Spanish banking history.

The European Commission threw Spain, the latest frontline in Europe's debt war, two potential lifelines on Wednesday, offering more time to reduce its budget deficit and direct aid from a euro zone rescue fund to recapitalise distressed banks, Reuters reported. Spanish government borrowing costs lurched higher and the Madrid stock market hit a nine-year low with investors rattled by the parlous state of its banking sector fleeing to the relative haven of German bonds.

Continued concerns about Spanish banks sent the country's stock market to fresh nine-year lows, the two-year German yield to zero and the euro to its weakest level against the dollar in nearly two years, The Wall Street Journal reported. Investors scrambled for safe havens, dumping stocks as well as debt from Italy and Spain, two financially stressed nations that also are among the biggest in the 17-nation euro zone.

A debt-laden Spanish construction firm became the latest European company to unload assets onto eager Chinese buyers, as Europe's debt woes force firms to look to China for cash, The Wall Street Journal reported. State Grid Corp., China's government controlled power-grid operator, said Tuesday it would buy high-voltage electricity transmission assets in Brazil from Spain's Actividades de Construccion y Servicios SA for 1.86 billion reais ($938.2 million), including debt.