Europe’s Economy Comissioner, Olli Rehn, has been meeting with Spanish officials to discuss its options in the wake of its bleak outlook.
It comes after the government revealed debt levels are set to rise next year as its banking system continues to hamorrage cash.
Although Spain’s austerity budget called for a lower than expected funds to save the industry, financial hawks are waiting for Madrid to seek a sovereign bailout.
Madrid’s forecast for an economic contraction of just 0.5 percent next year has also been met with deep scepticism on the market and the crisis may get worse.
Credit ratings agency Moody’s is set to announce this week whether it will downgrade Spain’s debt to junk bond status.
Adding to the country’s woes are further industrial disputes. Transport workers are the latest to go on strike over austerity measures.
There has already been a week of often violent protests against the government steps to tighten people’s belt even further.