Taoiseach Enda Kenny has said EU leaders face a test of credibility at their June summit when it comes to delivering on banking reform.

He received strong backing from Spanish Prime Minister Mariano Rajoy at talks in Granada tonight.

The talks took place in the dramatic grounds of the Alhambra - a military fortress which was converted into a majestic palace by a Sultan in the 14th century.

Mr Kenny was visiting Spain in the context of Ireland's Presidency of the European Council, which ends in June.

The last major diplomatic component of the presidency is an EU leaders’ summit, at which steps towards a banking union will be discussed.

In a blunt assessment, Mr Kenny said the summit would be a test of character for EU leaders in which they would have to deliver on their commitments to break the vicious circle between banks and sovereigns by advancing the banking union.

Mr Rajoy gave a resolute backing for Mr Kenny's position.

He argued treaty change was not required regarding for banking reform and the direct recap of banks through the eurozone's permanent bailout fund needed to be introduced as soon as possible.