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£80bn bailout won't 'put end to Spain's troubles'

Spain's grinding economic misery will get worse this year despite the country's request for a European financial lifeline of up to €100bn euro (£80.8bn) to save its banks, Prime Minister Mariano Rajoy said.

A day after the country conceded it needed outside help following months of denying it would seek assistance, Mr Rajoy said more Spaniards will lose their jobs in a country where one out of every four are already unemployed.

"This year is going to be a bad one," Mr Rajoy said in his first comments about the rescue since it was announced the previous evening by his economy minister.

The conservative prime minister added that the economy, stuck in its second recession in three years, will still contract the previously predicted 1.7% even with the help.

Small businesses and families starving for credit will eventually get relief as the funding props up banks and they increase lending, but Mr Rajoy did not offer guidance on when.

On Sunday, Spain became the fourth, and largest, of the 17 countries that use Europe's common currency to request a bailout - a big blow to a nation that a few years ago took pride as the continent's economic superstar only to see it become the hotspot in the eurozone debt crisis.

Its economy is the eurozone's fourth largest after Germany, France and Italy.

Meanwhile, Prime Minister David Cameron yesterday said he backs the chancellor's assessment that problems in the eurozone are holding back Britain's economic recovery.

George Osborne has faced criticism from some Conservative MPs over his claim yesterday that the UK recovery was being "killed off by the crisis on our doorstep."

Meanwhile, the Treasury yesterday announced it will slash the interest rate on its bilateral loan to Ireland for a second time.

Ireland will now pay a lower interest rate of 0.18% above the cost of funding.

The UK lent Ireland about £3.25bn in a bilateral loan last year as part of a £7bn contribution to the country's international bail-out package.