Spain bailout request may be near

Spain is preparing to become the fourth eurozone nation to seek emergency assistance as the currency bloc's finance chiefs plan weekend talks on potential aid to shore up the nation's lenders.

European Central Bank Vice President Vitor Constancio said Friday that a Spanish request was "awaited" and would be "exclusively directed at the recapitalization of banks." The bid may come as soon as Saturday, when finance ministers are to hold a conference call, according to a person familiar with the plans who declined to be identified because the matter is confidential.

The prospect of action underscores officials' concerns that Greek elections on June 17 may unsettle investors as Spain struggles to persuade markets it can protect troubled banks and finance its budget deficit. The country's credit rating was cut three grades by Fitch Ratings on Thursday, hours after Prime Minister Mariano Rajoy said for the first time that he was discussing with European leaders how to help Spanish banks.

"Finance ministers in the eurozone would like loose ends tied up before the situation in Greece goes live again," said Mujtaba Rahman, New York-based analyst for Eurasia Group. "This move is designed to be preemptive, to send a positive signal to market participants that the Spanish situation is being managed."

Constancio said that a decision should be taken quickly, and that it was up to the Spanish government to make a move.

That urgency contrasts with comments by Rajoy, who said Thursday he wouldn't act until he received a report from the International Monetary Fund on Monday, and the results of bank stress tests from two international consultants by June 21.

Deputy Prime Minister Soraya Saenz de Santamaria declined to comment when asked at a briefing Friday whether Spain was seeking a rescue. She reiterated that the government would wait until getting the reports before making a decision.

A bailout for Spain, reeling from a recession and the bursting of a property bubble, may dwarf previous rescues in the effort to stem the turmoil that began with Greece's disclosure in 2009 that its finances were in worse shape than previously known.

Since then, European governments and the IMF have made $480 billion in loan pledges to Greece, Ireland and Portugal. Spain's economy is more than twice the size of the three countries combined.

Fitch downgraded Spain to BBB, within two steps of non-investment grade. It said the cost to the state of shoring up banks may be as much as $125 billion, compared with its previous estimate of around $40 billion, as the country will remain in a recession next year.