The leader of Germany’s conservative parliamentary group, Volker Kauder, urged Madrid yesterday to seek help from the EU rescue fund EFSF to solve Spain’s banking crisis.

“Spain is going to have to make a decision, and I think it should seek protection from the fund because of its banks,” Kauder said in a televised interview.

As head of the CDU/CSU parliamentary group, Kauder is a close aide to Chancellor Angela Merkel, but Germany has until now taken care not to exert pressure on Spain as it battles the latest blaze in the eurozone debt crisis.

The European Financial Stability Facility (EFSF) is a temporary fund set up to help buffer indebted eurozone governments.

Spanish Prime Minister Mariano Rajoy has refused so far to seek financial assistance from the European Union that would come with strings attached, but has acknowledged that the situation with the banks is critical.

On Tuesday, Rajoy told Spanish lawmakers: “Europe must say where it is going, to give itself unity, it must say that the euro is an irreversible project that is not in danger, it must help nations in difficulty.”

According to the German daily Sueddeutsche Zeitung, a compromise under discussion could see European Union aid paid to the Spanish state-backed Fund for Orderly Bank Restructuring (FROB).

The Spanish government in turn would push through mergers or closures of weakened Spanish banks, the German newspaper said yesterday.

The report said that would differentiate the Spanish crisis from one in Greece, preserve Madrid’s sovereignty, and uphold the German position that EU funds should be paid only to public institutions.