Spain’s plans to revive Bankia with state money and sort out its regions’ finances have well and truly unnerved the markets. It seems that Plan A — to inject state bonds straight into the stricken bank so that it could offer them to the ECB as collateral in return for cash — was roundly rejectd by the European Central Bank, so Madrid rapidly produced a second plan which will involve the government raising yet more money on the bond market, not helpful to its drive to cut debt.

That leaves the impression that Spain is making up policy on the hoof, not something likely to endear it to the markets. That’s particularly unfortunate since it has actually done an awful lot on the austerity and structural reform front over the past two years. But not enough.

It’s not all one-way traffic. Madrid is pressing its insistence that the ECB should be the institution to deliver a decisive message to the markets that the euro is here to stay – presumably by reviving its bond-buying programme (highly unlikely at this stage).

Spain’s big plus was that it had issued well over half its 2012 debt needs in the first five months of the year but with some of the Bankia recapitalization set to fall on the state and its indebted regions having to refinance far, far more debt than had been anticipated that advantage has been eroded. The government is set to impose a new mechanism on Friday to provide funds to the regions with strict strings attached.

For the next couple of month things aren’t too acute but the country faces hefty refunding humps in August and October which could prove difficult. It will want borrowing costs to be significantly lower by then which will require measures to foster investor confidence.