So Spain was bankrupt. Between a loonytoons green energy policy that paid wind turbine owners for the electricity not generated while the wind was not blowing and solar panel owners foreectricity not generated while the sun was not shining (e.g. at night); a property bubble that saw banks lending money on properties built on toxic waste dumps, areas where motorways and shopping centres were planned within a few years or even on land that did not exist or was under the sea; the usual problems associated with outsourcing work to India and China and general incompetence they were up shit creek. What little money the Spanish government had, it had used to bail out the Spanish banks.
Spain was so up shit creek in fact that the traditional place for governments to raise money to fund their incompetence, the bond market, was closed to the Spanish. Nobody would take their IOUs.
The Spanish Banks were helpful however and bought up lots of government debt with the bailout money the government had loaned them. So helpful were they in fact that they ran out of bail out money. The Spanish bankers asked the EU Financial Stability Fund (the F-U) for a bail out. Instead of saying F U the E U was eager to help and offered a loan of 80 billion Euros.
Unfortunately the E U F U only had 400 billion Euros to work with and had already given 420 billion Euros of that to Greece, Portugal, Ireland, Italy, Malta and Cyprus they were up shit creek too.
"We will help out," said the EUFU boys but we will have to borrow some money from the bond markets. When the bond traders heard who the E U F U boys wanted the money for they fell about laughing.
Undeterred the E U F U went to other European governments but they either fell about laughing or they had no money either.
There was only one remaining option. The E U F U would have to borrow money from the lender of last resort to save the Spanish banks.
And who is the lender of last resort?
The Spanish banks.