Madrid is doing its own thing. Having complained about being excluded from last weekend’s European summit in Paris, José Luis Rodríguez Zapatero, Spanish prime minister, has unveiled his own plan to keep liquidity flowing and his domestic banking system afloat. The plan is pointedly different from the solutions so far drummed up by other European states.

The Spanish government does not plan to take substantial equity stakes in its banks, nor will it presume to dictate lending or remuneration policies. Instead, it will buy between €30bn and €50bn of bank assets. The public funding involved is of a similar magnitude to the US, at about 5 per cent of gross domestic product. But there the similarities between Mr Zapatero’s “tarpas” plan and Hank Paulson’s Tarp solution end. The Spaniards will only buy “healthy” assets, presumably triple-A paper.

Spain’s biggest banks, Santander and BBVA, have welcomed the plan. Why? Although details are still scarce, it should provide the country’s financial system with extra liquidity, given the strains that Spanish banks have placed on European Central Bank funding of late. Beyond that, the immediate need for the plan is unclear. Spanish banks are well-capitalised and a prudent regulatory system has prevented them straying into the dangerous territory of, say, their US or UK peers.

However, banks don’t need damaged assets to bring them to their knees: an old-fashioned recession can do the job just as well. As a percentage of GDP, corporate and household debt is higher in Spain than in France, Italy or Germany. The rapidly unravelling construction sector, to which Spanish banks are very exposed, also has a bigger share of the national economy. The end of the housing boom and the economic slowdown will inevitably lead to bankruptcies, and possibly bank failures. Madrid is less preparing a bail-out than positioning itself for the bad times – while also showing that it does not take its lead from Europe.

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