MADRID/BERLIN - Spain faces supervision by international lenders after a bailout for its banks agreed at the weekend, EU and German officials said on Monday, contradicting Prime Minister Mariano Rajoy who had insisted the cash came without such strings.
Financial markets responded with relief to Saturday's euro zone deal to lend Madrid up to 100 billion euros (80 billion pounds) to recapitalise debt-laden banks, with investors scooping up battered financial shares.
The euro and European stocks jumped, with the Madrid stock exchange opening up 5.3 percent and the euro zone STOXX banking index rising 4.5 percent in early trade.
Spanish and Italian bond yields fell after the deal eased fears of a run on Spanish banks. But previous "bailout bounces" on financial markets have been short-lived, often fizzling within a day or two as investors anticipate the next flare-up in the euro zone's unresolved debt crisis.
Greece's general election next Sunday could rapidly change market sentiment if radical leftists hostile to the austerity terms of Athens' EU/IMF bailout outpoll the mainstream conservative and centre-left parties that signed the deal, or the vote ends in another deadlock.
Rajoy said on Sunday Madrid had scored a victory by securing aid from euro zone partners without having to submit to a full state rescue programme, saying Spain's rescue had "nothing to do" with the procedures imposed on Greece, Ireland and Portugal.
But EU Competition Commissioner Joaquin Almunia and German Finance Minister Wolfgang Schaeuble said that as in those other bailouts, a "troika" of the International Monetary Fund, the European Commission and the European Central Bank would oversee the financial assistance.
"Of course there will be conditions," Almunia told Spain's Cadena Ser radio. "Whoever gives money never gives it away for free.
The IMF would be fully involved in monitoring Spain's programme even though it was not contributing funds, and banks that received aid must present a restructuring plan, he said.
Schaeuble told Deutschlandfunk radio: "The Spanish state is taking the loans, Spain will be responsible for them... There will likewise be a troika. There will of course be supervision to ensure that the programme is being complied with, but this refers only to the restructuring of the banks.