Eurozone finance ministers paved the way for their first direct bank recapitalisation when they unanimously voted to lend €100bn for Spanish banks.

Spain’s finance minister insisted again today that the country does not need a full-blown bailout, even as the country’s sky-high borrowing costs remained at dangerous levels.

Spain has raised €2.1bn from the bond markets – but at higher interest rates as investors remained concerned the country might still need external help to shore up its banking sector.

World stocks edged higher yesterday after data showed the US services sector grew at a slightly faster pace in May, but the Iseq fell nearly 2% as the eurozone crisis escalated, with Spain saying it was being shut out of credit markets.

Bankia, the fourth largest bank in Spain, could get less than the €19 billion in aid it has asked for, two sources said, prolonging uncertainty surrounding a rescue that has added to fears that Spain itself would need a bailout.

The Iseq index dropped below the 3,000 level yesterday to close down 52.16 points at 2,961.79.

Worries about Spain’s finances are intensifying as the country’s bond yields on international markets rose despite expectations of a new round of austerity measures.

Spain’s government has unveiled a €27bn deficit-reduction package including spending cuts and tax hikes on large companies, as it scrambles to convince the EU and investors that it will not need a bailout.

Spain is facing a general strike today as unions challenge a conservative government not yet 100 days old.

Spain said today that its budget deficit for 2011 has come in at 8.5% of GDP, even worse than the new conservative government's own already pessimistic prediction.

SPAIN’S parliament has approved the new conservative government’s first austerity measures, which aim to rein in the country’s swollen deficit with €8.9bn in spending cuts.

Spain’s new conservative prime minister has been sworn in and appointed his Cabinet, including ministers charged with lifting the country out of its severe economic crisis.