Spanish Bank Loan 'Restores Euro Credibility'

Spain's prime minister has said a bailout of its banks will secure the "credibility of the euro", but stressed the move was just one of many steps needed to boost the country's economy.

Spain will become the fourth nation to ask for help from Europe for its financial troubles, with a loan of up to 100bn euros (£81bn) for its banks.

The acceptance of aid is an embarrassment for prime minister Mariano Rajoy, who had said his country's banking sector would not need a bailout.

However, Mr Rajoy has admitted his government cannot fund the estimated 40bn euro (£32bn) bill to prop up the country's banks.

A formal request for the funds is not expected before June 21, when two independent audits of its banking system will be published.

"We took such measures because we believe in them," he told reporters in Madrid.

"I am utterly convinced that it is like a family or a company, you cannot spend what you don't have. No administration can do this."

Christine Lagarde, managing director of the International Monetary Fund (IMF), said the amount of cash pledged to Spain should be enough to reassure the markets that the problem is now in hand.

Britain's Foreign Secretary, William Hague, told Sky News the Spanish loan showed decisive action, which the British Government had for a long time been asking for.

"We welcome what we've heard about the eurozone loans to the Spanish banking system," Mr Hague said.

"We've been asking for the eurozone to take decisive measures to stabilise itself... Eurozone countries being prepared to work together in a closer way."

Meanwhile, Chancellor George Osborne has said the UK's hopes of economic recovery are being "killed off" by the eurozone crisis.

He said British businesses were being held back because of continuing uncertainty about the future.