Spanish workers light fires during street battles with police over biting austerity measures
Independent auditors have said up to 62 billion euros are needed to bail out Spain's crippled banks - well below the 100 billion euros offered by the eurozone, reports Sky News.
Auditors from the US and Germany have been studying bank balance sheets that have been hit by a collapsed property boom in the eurozone's fourth largest economy.
The stress tests from consultancies, Roland Berger and Oliver Wyman show Spain's banks need between 51 billion and 62 billion euros in extra capital to weather the financial storm.
Earlier this month Spain's government asked the EU for money to help prop up its beleaguered financial sector.
Although they haven't agreed on an amount yet, the eurogroup of 17 nations that use the euro said 100 billion euros would be made available to rescue Spain's banking sector, which is struggling under toxic loans and assets.
The results of the audits will now be used by the Spanish government to determine how much of 100 billion euros of available European funds it needs to recapitalise ailing lenders, and then to formalise an aid request to other eurozone countries.
Deputy Bank of Spain governor, Fernando Restoy noted that the audits' worst-case scenario was far below the money pledged by the eurozone.
The latest audits follow one by the IMF. A third is expected to be published at the end of July, despite reports suggesting it may be delayed until September.
Greece and Portugal both required additional money after the initial injection of cash, but Europe has insisted that it will give Spain the money it needs and a little bit more to cover unforeseen circumstances.
The interest rate that the Spanish government has to pay on 10-year borrowing has twice climbed above the psychologically important 7% mark in recent weeks.
It is proof that Spain's fortunes, rather than Greece's, are key to the future of the single currency.
Francois Hollande, the new French president, has said that the high borrowing costs for Spain and Italy are unacceptable and Europe must show "a much faster ability to intervene".
That intervention might come via the two Euro bailout funds: The EFSF and ESM.
Journalists at the meeting of the G20 in Los Casbos, Mexico, were briefed that a plan mooted by the Italian PM Mario Monti might be implemented.
It would allow the EFSF and ESM to directly buy Spanish and Italian sovereign bonds in the hope that such action would help bring the yields (interest rates) down.
That would require approval from Germany which has so far been opposed to such measures - although it is likely to be discussed further when Angela Merkel meets Mario Monti, Francois Hollande and Spanish PM Mariano Rajoy in Rome on Friday.
It could be announced officially at an EU leaders' summit in Brussels at the end of next week.
Spain looked to raise two billion euros at a sale of two, three and five-year bonds today and managed to easily secure that sum but the rates demanded for the bonds maturing in 2014, at 4.7%, were more than double those paid in March