The Spanish government called for investor calm yesterday as shares in the country’s second-largest bank tumbled nearly 30 per cent and Moody’s prepared a sweeping downgrade of the country’s lenders.

Further fuelling the sense of unease among eurozone banks, the government in Cyprus announced it would underwrite a €1.8bn capital raising by Popular Bank of Cyprus that analysts said could force the tiny island nation to seek bailout assistance from Brussels. Fitch also warned that it might place all eurozone sovereign ratings on negative watch following a rerun of Greece’s parliamentary election next month.

In Madrid, the government moved to stem any suggestion of a “run” at Bankia. “There is no concern about a possible flight of deposits [from Bankia], as there is no reason for it,” said Fernando Jiménez Latorre, secretary of state for the economy. After dropping 29 per cent, Bankia’s shares recovered on news of the assurances by Mr Latorre and José Ignacio Goirigolzarri, the bank’s new chairman.