INTERNATIONAL. Even before Spain completed an agonising U-turn and secured a massive European rescue of its banks Saturday, analysts fretted over the risk of a far bigger bailout for the state itself.
Just 12 days earlier, Prime Minister Mariano Rajoy flatly rejected any chance of outside help for distressed banks crippled by a huge exposure to the collapsed property sector.
"There will be no rescue of the Spanish banks," he said.
But global political and financial market pressure transformed his conservative government's position.
After an emergency video conference lasting more than two hours, eurozone finance ministers said they were "willing to respond favourably" to a Spanish plea for up to 100 billion euros to shore up its banks.
Eurozone policymakers, desperate to resolve Spain's problems before Greece holds potentially destabilising June 17 elections, said they wanted to provide an "effective backstop".
Spain's government has been left struggling with the political humiliation of being lumped together with the salvaged economies of Ireland, Greece and Portugal.
"This has nothing to do with a rescue," Economy Minister Luis de Guindos told reporters, arguing that Spain would repay the money, and that it came without austerity conditions on the broader economy.
But there is no guarantee that a banking rescue will satisfy the financial markets.
"It will soon increase the speculation on whether the country will have to request a rescue programmme for its normal public finances too," Commerzbank analyst Ralph Solveen warned in a report.
After the formal request, Spain must still wait for a period while the intervention is prepared, two months in Portugal's case, said Jose Carloz Diez, chief economist at brokerage Intermoney.
"The details will come later and the devil is in the details," Diez said. "The negotiations will be made to measure, there is no reason for the programme to be same as for Portugal or Ireland."
The goal of the financial sector rescue should be to avoid a much costlier bailout for the eurozone's fourth biggest economy, Diez added. "It would be good to do it just once, realistically."
Besides the banks, Spain faces a deep problem on its own books: it racked up a public deficit equal to 8.9% of total economic output last year, and it is struggling to slash that to 5.3% this year.
The task is complicated by Spain's 17 powerful regions, which account for half of all state spending and have been criticised by investors for lacking fiscal restraint.
"There is still an awful lot to do," said Daniel Pingarron, analyst at IG Markets.
Still, the banking assistance "is very good news for the Spanish economy and will speed the country's exit from crisis," he said.
If Spain had not found the money for its banks, it would have been forced into a bailout by autumn, Amador Ayora, director of business daily El Economista, wrote in an editorial.
"The problem is that the amount would no longer be 60-80 billion euros but about 500 billion euros," he said.
Two other problems still weighed on the economy, said Rafael Pampillon, economics professor at IE Business School in Madrid.
One was the property market which still has huge numbers of homes for sale with little demand, four years after a real estate bubble imploded.
The other was the labour market, with the unemployment rate at 24.4 percent in the first quarter of 2012, the highest in the industrialised world. "It is going to take a long time to pick up," Pampillon said.