Mariano Rajoy, Spanish prime minister, insisted when he came to office that not one euro more of taxpayers’ money would be used to bail out the banking sector. But the meltdown at Bankia, the savings bank that holds 10 per cent of the country’s deposits, has forced Mr Rajoy to confront the bull elephant in his room.

Despite raising €23bn since the collapse of the property market, Spain’s banking sector remains woefully undercapitalised. The government’s programme of forced consolidation and €54bn in compulsory writedowns may have put pressure on banks to begin facing up to the excesses of their decade-long property binge. But it still failed to address the true extent of the sector’s property problems. As the recession bites, property and land prices are melting; now even the value of previously performing loans is in doubt.

Mr Rajoy is planning to address the issue with a new demand for writedowns, this time on performing loans. The plan is to call for a further €30bn in provisions across the sector. The risk is that even this will not be enough. Spanish banks still have an estimated €180bn in questionable property loans on their balance sheets.