On Saturday, June 9th the 17-nation euro zone agreed to lend Spain up to $125 billion (100 billion euros) for its bank rescue fund in an attempt to reassure investors and erect a new firewall in the currency bloc's sovereign debt crisis. But it remains unclear exactly how much help Spain will seek and whether the loans will come from the temporary EFSF or from the ESM, which is due to come into effect on July 1.

Meanwhile, on Monday June 11th , the markets in Europe and Asia have rise. The FTSE 100 in London rose 0.7%, the Dax in Frankfurt was up 1.8% and the Cac 40 in Paris was up 1.0%. Spain's benchmark index, the Ibex, rose 1.8%. All had earlier made bigger gains. The yields on 10-year Spanish government bonds - an indicator of its cost of borrowing - rose sharply to 6%. Italian yields briefly rose above 6%. The Nikkei in Tokyo closed up 2.0%. The Hang Seng in Hong Kong closed up 2.4%.

Spain's weakest banks were left with billions of euros of bad loans following the collapse of a property boom and the subsequent recession.

On the bond markets, the yield on Spanish 10-year bonds briefly dropped below 6%. Bond yields are taken as an indication of the interest rates that governments would need to pay to borrow money.

The exact amount of emergency funding that Spain will receive will be decided after two audits of its banks are completed within the next few days.

Spain is in its second recession in three years and the economy is expected to shrink by 1.7% this year. "The Spanish announcement is not a solution to the eurozone's ongoing woes, but it is a statement of intent," said Richard Hunter from Hargreaves Lansdown stockbrokers.

"Some much-needed time has now been bought in Spain, which will allow the market an at least temporary sigh of relief."

"This year is going to be a bad one, growth is going to be negative by 1.7 per cent and unemployment will increase," Spain's Prime Minister Mariano Rajoy said. "Last year, the country's public administration spent €90 billion more than it received. You can't go on like that."

Spain is the largest economy to require a bailout from the EU since the emergence of the single currency, and is the fourth in total. The exact amount will be decided in the coming days following an audit of the country's struggling banks, with the money set to be distributed by a specialist government agency.

Economy minister Luis de Guindos denied it was a bailout, claiming "this is not a rescue". "This is a loan which is given in very favourable conditions, which will be determined in the next few days," Mariano also said. "But they are very favourable – much more favourable than the market ones."

Spain is in its second recession in three years, with the economy expected to shrink by 1.7 per cent this year and unemployment at nearly 25 per cent.

European Commission President Jose Manuel Barroso, said: "We are certain that Spain can gradually regain the confidence of investors and market participants."