Eurozone finance ministers eyed an up to 100-billion-euro ($125 billion) strings-attached rescue of Spain's distressed banks at emergency talks on Saturday.
With banks in the eurozone's fourth largest economy hobbled by heavy losses on real estate, finance ministers in the 17-nation Eurogroup held an emergency conference call to outline a rescue deal for Spain.
"The amount on the table at the moment is as much as up to 100 billion euros but this hasn't been decided yet," a senior EU official told AFP on condition of anonymity.
Asked whether the eurozone would set conditions in return, the source said: "Conditions to the Spanish government but these will only entail a clean-up of the financial sector."
Unlike bailouts already approved for Greece, Ireland and Portugal, Spain is believed to have been lobbying discreetly for a deal focused purely on helping banks, thus avoiding outside interference with its sovereign affairs.
There has been no official request from Madrid for a rescue and despite intense pressure from eurozone nations, Spain has been reticent about a bailout.
Leaders of the single currency area are keen for quick action to avoid further contagion ahead of an unpredictable election in Greece in just a week that could in the worst case see Athens quit the eurozone.
"The solution must come quickly," Jean-Claude Juncker, the Luxembourg premier who heads the Eurogroup, told German radio late Friday.
Wading in on Saturday, German central bank chief Jens Weidmann urged Madrid to resort to the eurozone financial rescue fund, the EFSF.
"If Spain feels overwhelmed by its financial needs, it should use the instruments which have been created for that." he said.
In Madrid, a government source said officials were examining an International Monetary Fund report on its banks and would wait for the outcome of the ministers' conference call that began at 1400 GMT before commenting on a bailout request.
"There is a meeting that was called by Brussels. We are waiting to see the results and we are analysing the IMF report," the source said.
Spanish authorities appeared resigned to formally asking for help, a European government said, and had unofficially launched the process a few days ago.
If Spain, which faces deteriorated public finances and widespread unemployment, does ask for help it would mean eurozone leaders have failed in their desperate attempts to contain the debt crisis to Greece, Ireland and Portugal.
A Spanish bailout would thrust the eurozone into uncharted waters because Spain's economy is more than twice the size of those three countries combined.
The IMF bank stress tests, which were unveiled three days ahead of schedule, determined that Spanish banks need about 40 billion euros ($50 billion) in new capital.
But a fund official noted that the banks would probably need more than that to build a "credible firewall" against financial market speculation.
IMF chief Christine Lagarde, who sat in on the conference call, called earlier on Saturday for closer cooperation among the countries that share Europe's single currency.
She argued in an interview for a common eurozone debt guarantee that would send "a clear signal to the markets that Europe has a common plan and its members want to follow it together.
"What is currently undermining efforts to support the euro are uncertainties and doubts about the long-term view of politicians and whether the eurozone will last," Lagarde told the daily Sueddeutsche Zeitung.
German Finance Minister Wolfgang Schaeuble told the regional newspaper Passauer Neue Presse meanwhile that the time had come for tighter European integration.
"It's clear. We have to attain the next step of political integration in Europe. The crisis is forcing the necessary transformations to take place more quickly," he said.
EU leaders are to attend a summit here on June 28-29 aimed at reinforcing European integration.
Meanwhile the IMF tests showed that while Spain's top two banks -- BBVA and Banco Santander -- were solid, the rest of the banking sector was struggling.
If the current stress continues "the largest banks would be sufficiently capitalised to withstand further deterioration, while several banks would need to increase capital buffers by about 40 billion euros," an IMF statement said Friday.
Fitch Ratings has estimated the amount needed at up to 100 billion euros.
The ratings agency Moody's warned Friday that an EU rescue of Spanish banks and a possible Greek exit from the eurozone could lead to a broad cut of eurozone sovereign ratings, including those of top-rated France and Germany.
Meanwhile, US President Barack Obama urged Europe to act swiftly to fix its banking woes.
"In the short term they have got to stabilise their financial system. Part of that is taking clear action as soon as possible to inject capital into weak banks," he told reporters on Friday.© ANP/AFP