Spain has now fully taken Italy's place at the back of the eurozone class. Ten-year Spanish bond yields have shot up 0.85 percentage point from their lows this year to 5.50%, a far worse showing than Italian yields, which are 0.29 point off their lows at 5.10%. Madrid has raised its deficit target and failed to convince markets it has fixed the banking system. But Rome can't afford to relax.

Spain faces a combined deterioration in government and bank balance sheets. Investors fear Madrid's bank overhauls don't go far enough to force banks to recognise losses and raise fresh capital. Spain's banks have €400bn in construction and real-estate loans that were built up when growth was running at a 3%-4% annual clip. Now, the economy is set to contract 1.7% this year. Bad loans rose to 7.91% in January, the highest since November 1994.