The news this weekend that Spanish banks would be given a large boost by the ECB came as little surprise, with a much publicized lead up that underlined the massive liquidity problem that faced many banks in the country. The bailout is a legacy of the property bubble and subsequent crash, which left banks such as Bankia and other smaller lenders with massive debts.

The Spanish PM was at pains to state that the money was solely for the banking sector and not the government itself, but the terms of the bailout means that the Spain will have to foot the bill. Germany was concerned that funnelling the money directly to the banks would mean having to revisit the deals that were given to Portugal and Ireland and thus facing even more ire from German taxpayers. 

With unemployment at about 24% and the economy back in recession it remains to be seen how the markets will react to the news long term, and if indeed Spain can repay the debt that it now owes. 

The markets had started today positively about the bailout news with both yields on Spanish government bonds going down and a boost to markets around the world. In the past few hours however we have seen a reverse in the trend as markets start to focus on the terms of the deal which are looking less favourable with each passing minute.

Initial reaction in the are that the bailout does not address the issue that Spain may be locked out of external funding due to high borrowing costs that continues to stay high.

So tension remains in Spain after the short-lived optimism and more action must now be taken to save the currency, which at the current rate is continuing down the path to disintegration. Europe will be eagerly awaiting the results of the Greek election on the 17th of June, and should  anti-austerity parties getting into parliament it may result in Greece being ejected from the Euro - a painful scenario that must be avoided both for Greece and the global economy at large.