Spanish prime minister Mariano Rajoy has defended his government's attempts to shore up the country's troubled financial sector, blaming the previous Socialist administration for failing to deal with the problem in 2009.
During a parliamentary debate on the offer of a loan of up to 100 billion euro (£80 billion) from the 17 eurozone countries, Mr Rajoy blamed then-governing Socialists for refusing to acknowledge Spain's banks were vulnerable over a property boom that went bust.
It is understood finance ministers from across the Eurozone will hold a telephone conference to discuss a bailout for Spanish banks.
Angela Merkel said Europe was ready to act to ensure stability in the euro zone as Spain's credit rating was cut by three notches.
"We are ready to back the use of euro-area instruments" - Did Merkel just hint at a breakthrough for the banks?