The European Union has urged Spain to rapidly clear up doubts over its mammoth rescue of stricken lender Bankia so as to calm investors fearing a financial breakdown.

As Spanish government bonds and stocks took a hit, the bloc called on Madrid to provide details of its bailout of Bankia, which is seeking a total €23.5 billion.

Bankia has asked the state for €19 billion to repair its books, in addition to €4.5 billion already injected, the biggest rescue in Spanish banking history. 

"What we need from the Spanish government is for it to communicate the restructuring plan for Bankia and the options it is considering to restructure and if possible recapitalise," said EU spokesman Amadeu Altafaj.

"We will then study it to see if is fulfills conditions for public aid," Altafaj, who is spokesman for EU economics commissioner Olli Rehn, told Spanish public broadcaster Radio Nacional de Espana. "We cannot keep up this uncertainty which is weighing on confidence in the markets," the spokesman said.

"No-one can expect that with these negative results from some banking entities the markets are going to react with euphoria. So the sooner we eliminate uncertainties the better," he added.

The rate on 10-year government bonds hit 6.681%, only a little down from six-month highs hit the day before and still at levels regarded as unsustainable over the longer term.

The extra premium over safe-bet German bonds spiked to 5.41 percentage points, matching the previous day's euro-era record, before easing to a still-punishing 5.27 percentage points.

Altafaj said that although the Europe Union had a rescue mechanism, any use of it would require negotiating a bailout of the Spanish economy, even if it was focused on only one sector. "If it is possible to raise the funds through market mechanisms or through actions by the Spanish government, that is better than resorting to a rescue, which has negative connotations," he warned.

Economy Minister Luis de Guindos said this week the government would save Bankia through a bond issue by the state-backed Fund for Orderly Bank Restructuring (FROB), which would inject capital as needed.

But his plan, coming at time when markets are demanding exhorbitant rates of return, fed expectations among investors that Spain will need an international bail-out.

A report in business daily Cinco Dias said the government was considering recapitalising Bankia in stages, progressively pumping in capital according to liquidity needs so as to avoid the expense of a single rescue. That would also give the European Union time to agree on a possible rescue, the paper said.

The government this month instructed banks to set aside an extra €30 billion in 2012 in case property-related loans go bad, on top of €53.8 billion required under reforms enacted in February.

Bankia, with a huge exposure to the property market, which crashed in 2008, would need €7 billion to meet the requirements of the new banking reform.

IMF says no loan talks with Spain

The IMF said it was not discussing a rescue loan programme with Spain, as Spanish Deputy Prime Minister Soraya Saenz de Santamaria was to meet the global lender's chief Christine Lagarde today.

"The IMF is not drawing up plans that involve financial assistance for Spain. Nor has Spain requested financial support from the IMF," spokesman Gerry Rice said.

The meeting between the two is "to discuss recent economic developments in Spain and the euro zone," Rice said.

Speculation has mounted that Spain will seek a Greece-style rescue loan from the International Monetary Fund and the European Union as the country endures economic recession and its banks crumble under the weight of massive bad property loans.

Amid calls for Europe to find ways to help strengthen Spain's banks, Rice said the IMF continues to urge the European Union to build institutions for risk-sharing in the finance system.

Spanish bank renegotiates €14m pension

Spanish bank Bancaja says it is renegotiating its financial director's pension after reports of a €14m package sparked public outrage. The bank is part of the crisis-torn Bankia group.

News of the lucrative benefits scheme emerged after the government nationalised Bankia this month. It made the move to salvage a balance sheet with vast exposure to Spain's property market, which crashed in 2008.

Economy Minister Luis de Guindos told reporters today that he believed the package was "unacceptable" and said he had asked the Bank of Spain to see if there was anything it could do.

Bancaja, which held a board meeting in Valencia yesterday, said its financial director Aurelio Izquierdo had not yet received any money because his rights were linked to retirement, which he had not taken.

It did not give any figures, but the Bancaja annual report showed that the bank had pension commitments to one member of the upper management of €13.92m. The figure included €7.633m for a fixed benefit retirement, death or injury policy and another €6.285m for a savings plan with fixed benefits in case of early retirement.

"Without prejudice to this, the existing board of Bancaja proposed to Aurelio Izquierdo the revision of existing accords, a proposal that was accepted with full readiness on his part," it said in a statement issued after the board meeting.

Bancaja was one of seven troubled regional savings banks, or cajas, that merged in 2010 to form Bankia. Bankia has had to revise its 2011 results to show that instead of a net profit of €309m it actually made a net loss of €2.979 billion due to write-downs in its loan portfolio.