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MADRID -- Spain's government has declared victory after performing a U-turn and agreeing on a eurozone rescue for its banks; now it is the markets' turn to say if they agree.
Investors' reaction to the 17-nation eurozone's agreement to provide a loan of up to 100 billion euros ($125 billion) for distressed Spanish banks, will be pivotal, economists said.
Economy Minister Luis de Guindos insisted the deal was not a rescue, just a loan that imposes conditions on the banks.
Prime Minister Mariano Rajoy, who flatly declared 13 days earlier that Spain's banks would not be rescued, went further Sunday and described the aid as a win for Spain and Europe.
But the liability for the eurozone financing rests fully with Madrid and the cost will be added to Spain's total public debt, said Saxo Bank chief economist Steen Jakobsen.
If Spain took a loan of 100 billion euros in one go, it would increase the public debt by 10 percentage points.
"A bail-out is a bail-out Spain, sorry," Jakobsen said in a report.
He was also gloomy about the market outlook.
"Markets seem to think this will lead to strong open -- I doubt this is more than a 24-hours' rally," he said.
The banking rescue was only the start of a long process, said Edward Hugh, independent economist in Barcelona.
"Every time we have seen more money injected in this whole thing, more money has gone less far," he said.
Investors could decide to attack Italian debt and ease pressure on Spain until the Greek election June 17, when it is feared voters could reject austerity measures and prompt a eurozone exit.
"It is only when something actually happens, if anything does happen with Greece that then you would see the Spanish (borrowing costs) spike again," Hugh said.
Spain may be forced into seeking a full sovereign rescue when it has to face the question of financing in the debt-laden regions, he predicted.
"This could start from the autumn," Hugh added.
"This would officially be the bailout; they would find they could not manage it with a credit line so they would have to go for a bailout."
Other analysts were relatively positive about the immediate market reaction.
"The bailout will certainly buy the Spanish government time and improve Spanish banks' access to funding," said a report by financial market research group CreditSights.
Rumours of the impending assistance helped Spain meet its fund raising targets in an bond auction last week, it said.
"But it won't provide a lasting fix for the problems faced by Spain and we still believe that a request for (full EU) assistance is on the cards," the group said, adding: "Though the time until one is required has now been extended."
Anton Losada, political science professor at the Santiago de Compostela University, said that if the pessimists were right, Spain could be locked out of the bond markets and find its debt downgraded to junk bond status.
"Then the rescue would have to be broadened, obviously."