Spain hopes its regional banks will fund bailout

SPAIN is finalising plans to find fresh funds for its troubled savings banks, officials said, prompting speculation the government may have to spend more while fighting to slash a massive deficit.

Madrid hopes the regional banks can raise the capital -- which it has been denied would reach the €30bn (£25.4bn) cited in a newspaper report from private investors. No private capital deals have yet been struck.

Spain will have to raise more capital in the money markets to shore up a banking system heavily exposed to a collapsed property market, economists say. The regional banks are at the heart of concerns Spain may seek an Ireland-style bail-out.

Spain’s risk premium over benchmark German debt narrowed, falling to its lowest level since mid-November.