Ailing Spanish banks will receive €30 billion (£24 billion) out of the sanctioned €100 billion (£125 billion) by the end of July, concluded the emergency talks among eurozone finance ministers early Tuesday.
The nine-hour talks held in Brussels also extended the deadline for the correction of the excessive deficit by one year to 2014. The final agreement will be sealed around 20 July.
"We are aiming at reaching a formal agreement in the second half of July, taking into account national parliamentary procedures, allowing for a first disbursement of 30 billion euros by the end of the month to be mobilised as a contingency in case of urgent needs in the Spanish banking sector," the BBC quoted Eurogroup President Jean-Claude Juncker as saying.
Each bank will have separate conditions while the overall supervision of the banking sector will also be strengthened, said Juncker.
Until a complete review of the status of the banks is done, the released €30 billion will be held by Madrid as contingency funds to be used in an emergency. Spain will set up a separate company to monitor banks which tap funds from the European bailout.
Juncker also urged Madrid to take measures on public finances to bring them on par with existing EU norms.
Yet another issue was also sorted out at the talks; it was decided that Spanish banks would directly be injected funds without a state guarantee, once the proposed central European banking supervisor is set up next year. Till then, the bailout aid will be directed through Madrid's existing bailout fund system known as Frob.
Earlier, confusion prevailed on how the banks would be able to get the funds, whether or not through the respective governments. The exact process of the recapitalisation plan will be thrashed out only in September.
Members of the Eurogroup re-elected Luxembourg Prime Minister Juncker as chairman extending his term by another two and a half years. German Klaus Regling was chosen to spearhead the permanent bailout fund of the European Stability Mechanism. Regling set up previous bailout measures for Greece, Ireland and Portugal.