Spain could ask for a rescue of its struggling banks during an emergency conference of European finance ministers Saturday, with some observers saying the bailout package could be as large as €80 billion ($100 billion).
Leaders from across the eurozone were discussing a p ossible bailout package via conference call, amid a new International Monetary Fund report that says Spanish banks need at least €40 billion ($49.87 billion) in capital.
The IMF report was due to be published Monday and analysts say the fact it was released early speaks to the urgency of the situation.
Swedish Prime Minister Fredrik Reinfeldt, whose country does not use the euro and thus was not on the call, said there was talk of handing over as much as C80 billion. Others have said even more — up to C100 billion — is needed.
Reinfeldt, who spoke with national broadcaster Swedish Radio ahead of the afternoon conference call, called the situation "serious."
"In reality, we're talking about one of the greatest financial rescue operations the world has seen," he said.
"It's absolutely imperative that Spain receives a bailout very quickly because confidence is ebbing. It's sagging away in the banking system as a whole," Global markets analyst Patrick Young told CBC News.
Bankia, Spain's fourth-largest bank, "was sold on the stock market by the government just a couple of years ago, and it was sold to retail investors, and they've lost 75 per cent of their money," Young said.
"Investors are feeling very sore. They're lacking confidence."
Bankia was crippled after a real estate bubble bust four years ago. Housing prices were tripling and quadrupling over the last decade, while banks fed the market with low interest rates.
Spain, as of Saturday afternoon, had not requested help, according to Guy Schuller, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker who chairs meetings of eurozone finance ministers.
But Schuller said finance ministers from the 17 countries that use the euro "want to prepare if the call comes."
The IMF issued its report on Friday, three days early, and a day after credit rating agency Fitch downgraded Spain's credit rating to just two notches above junk.
While there has been speculation Spain's banking system will need anywhere from €40 billion to €80 billion, Fitch has estimated the banks will need as much as €100 billion.