Borrowing by Spain’s struggling banks from the European Central Bank hit a 17-month high in December as it offered cheap long-term loans to the eurozone, according to the Bank of Spain.

The ECB lent Spanish banks €118.86 billion in December, up 21.3 per cent from November, it said in a statement.

The amount borrowed was boosted by the ECB issuing of three-year loans at one percent so as to inject liquidity into eurozone banks in December.

The amount of loans extended by the eurozone central lender to Spain’s troubled banks reached a record high in July 2010, during a major restructuring prompted by the global financial crisis from 2008.

It had been steadily falling since, reaching €42.23 billion in April 2011, before rising again from September.

Markets have shown concern in recent months over Spain’s financial stability amid fears that the debt crisis which sank Greece and has snagged Italy could spread there. Economists warn that Spain is heading into recession this year.

Centre-right Prime Minister Mariano Rajoy took office last month promising to further reform the banking sector.

His government has warned that Spanish banks will have to make provisions worth €50 billion this year to cover losses on bad property-related assets.

Mr Rajoy has warned that Spain’s overall public deficit may exceed eight per cent of gross domestic product in 2011, far higher than the previous six per cent target. He aims to lower it to 4.4 per cent in 2012 through austerity measures.