People in Europe feel like the Ancient Mariner. While the ECB has offered help via the European Stability Vehicle Fund (quaint name, and equally difficult acronym), the messages from Spain seem mixed. They need the banks to be recapitalised, no, the sovereign nation is too big to be bailed out, etc.
They should just align their objectives to the reality of what is available. The ESVF credit is unlimited upto a certain extent, meaning I guess that it is quite generous, at a low interest rate. If the Spanish banks were to hold fort and take account of their assets, they may find that they need some cash flow, and maybe the housing market can start to heal in about a year to 18-months, that's all it might take.
Perhaps an immediate cash injection of 10 Billion might be sufficient. Once such an amount feeds through, it will create many jobs and much activity, and create wealth to repay the investment. Then, say, in another 6 months, another cash injection can be introduced, with a better credit rating, and it will become easier, etc. You have people who want to earn a living, houses lying empty like toxic assets when they are very valueable assets, and banks who just need to become like building societies cum landlords. When people have houses, jobs and work activity, wealth becomes created, enabling people to eat and drink and enjoy entertainment and be able to save a little as well. All Spain needs is some support at this stage, and time. With the weather and culture, resources rightly applied will bring tourists back, and even people wishing to settle there and buy houses and the commercial properties...It is just a matter of time.
That's all they need: some time, some support, and a free hand to do things in their own tradition, and very soon this magnificent economy will heal. For that I pray.