Spanish banks, reeling from bad home loans and a horrible economy, will almost certainly have to be bailed out by the EU to the tune of $40 billion.
That's the estimate from the IMF. But will Spain bend the knee and beg the EU for the cash?
The IMF said its "stress test" does not include extra capital that it recommends Spain needs as a buffer to cover restructuring costs and loan losses. An IMF official said such a buffer usually would be 1.5 to two times larger to convince markets that Spain has a credible cushion to handle shocks.
In Spain's case, that would bring the size of capital required to stabilize its banking system to as much as 80 billion euros, although the IMF did not specify a figure in its Financial Sector Assessment Program report released on Friday.
Spain is expected to ask the euro zone for help with recapitalizing its banks this weekend, sources in Brussels and Berlin told Reuters on Friday, becoming the fourth country to seek assistance since Europe's debt crisis began.
Spain's deputy prime minister, Soraya Saenz de Santamaria, said the government needed to have at least a preliminary estimate of how much extra capital the banks needed before taking a decision.
Hence the IMF's report was critical in helping shape Spain's request. Fitch ratings agency said the cost could be between 60-100 billion euros.
The IMF said it worked closely with the Spanish central bank in examining the balance sheets of Spain's institutions to come up with the assessment. The country's two largest, international diversified banks - Banco Santander and BBVA - are prudently managed and can sustain profits even in stressed scenario, it said.
"While the core of the system appears resilient, vulnerabilities remain in some segments," it said.
These weaknesses are concentrated in a group of commercials banks that are not diversified internationally and in former small savings banks that have converted to commercial banks, which already have received some support, the IMF said.
Looking for political cover, Prime Minister Mariano Rajoy held talks with socialist opposition chief Alfredo Perez Rubalcaba. It's not clear exactly what the two men discussed, but speculation centers on some kind of joint statement on the bank bailout. Spain's pride will be wounded by having to ask the EU for help, and sharing the political fallout would make sense in that regard.