Eurozone finance ministers tonight agreed to lend Spain up to €100bn to recapitalise its banks.
After a 2.5-hour conference call of the 17 finance ministers, the Eurogroup and Madrid said the amount of the bailout would be sufficiently large to banish any doubts.
"The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to €100bn in total," a Eurogroup statement said.
Spain said it wanted aid for its banks but would not specify the precise amount until two independent consultancies - Oliver Wyman and Roland Berger - deliver their assessment of the banking sector's capital needs some time before 21 June.
"The Spanish government declares its intention to request European financing for the recapitalisation of the Spanish banks that need it," Economy Minister Luis de Guindos told a news conference in Madrid.
He said the amounts needed would be manageable, and that the funds requested would amply cover any needs.
Irish Finance Minister Michael Noonan this evening said the Spanish deal will not mean a better deal for Ireland on its banking debts.
Speaking in Limerick, Minister Noonan said the deal agreed with Spain replicates the recapitalisation part of the deal that was done for Ireland.
He described the deal as "satisfactory" and said it would bring about much needed stablity to the eurozone.
Minister Noonan said that he would have preferred if the money was pumped directly into the Spanish banks rather than through the sovereign and he said he would expect the same to apply to Ireland.
He said today was not the day for discussing that but he told finance ministers on this afternoon's conference call that he would be returning to it at future eurozone meetings.
Spain denies deal is a 'rescue'
Mr de Guindos refused to describe the aid as a rescue, which his government had categorically ruled out even in the days leading up to the formal request for cash.
"This has nothing to do with a rescue," he insisted, arguing that the aid would be directed to the 30% of banks with the greatest exposure to the 2008 property market crash.
The deal imposed no conditions on the overall Spanish economy, and no new austerity measures, Mr de Guindos said.
"The only conditions are for the banks. There are no additional conditions for the Spanish people," he added.
A bailout for Spain's banks would make it the fourth country to seek assistance since Europe's debt crisis began.
With loans to Greece, Ireland, Portugal and now Spain, the EU and IMF have now committed around €500bn to finance European bailouts.
Officials said there had been a heated debate over the International Monetary Fund's role in Spain's bank rescue, which Madrid wanted kept to a minimum. It will not provide any of the money.
It was eventually agreed that the IMF would help monitor reforms in Spain's banking sector, while EU institutions would ensure Spain stuck to its broader economic commitments.
IMF Managing Director Christine Lagarde said the eurozone's plan was consistent with the IMF's estimate of the capital needs of Spain's banks and should provide "assurance that the financing needs of Spain's banking system will be fully met."
Sources involved in the talks said there had also been pressure applied on Madrid to make a precise request right away, but Spain had resisted.
The Eurogroup said the funds could come from either from the eurozone's temporary rescue fund, the EFSF, or the permanent mechanism, the ESM, which is due to start next month.
Finland said that if money came from the EFSF, it would want collateral.
EU sources said there was a preference to channel money to Spain through the ESM, rather than the EFSF.
Under the ESM, an approval rate of 90% or less is needed to trigger aid, and the fund also has more flexibility in how it operates.
"That's why it's so important that the ESM ... be ratified quickly," German Finance Minister Wolfgang Schaeuble said.
The Spanish government has already spent €15bn bailing out small regional savings banks that lent recklessly to property developers.
Spain's biggest failed bank, Bankia, will cost €23.5bn to rescue and its shareholders have been wiped out.
