The conservative prime minister added that the economy, stuck in its second recession in three years, will still contract the previously predicted 1.7 percent in 2012, even with the help.
Spain on Saturday became the fourth - and largest - of the 17 countries that use Europe's common currency to request a bailout. This is a big blow to a nation that a few years ago took pride as the continent's economic superstar only to see it become the hot spot in the eurozone debt crisis. Its economy is the eurozone's fourth largest after Germany, France, and Italy.
Although Spain has not yet said how much money it would seek, the Eurogroup - finance ministers of the 17-country eurozone, of which Spain is a member - said in a statement Saturday that it was prepared to lend up to (euro) 100 billion ($125 billion). The funds, which will come from one of three pools of emergency financing that eurozone countries can access, will be sent to the Spanish government's Fund for Orderly Bank Restructuring (FROB), which would then use the money to strengthen the country's teetering banks.
Across the country, Spaniards reacted with a mixture of anger and relief to the news. The full amount of the eurogroup's lifeline amounts to (euro) 21,000 of new debt for each person - almost equal to the average salary in a country of 47 million where the unemployment rate for those under age 25 is 52 percent.
The country is already reeling from deep austerity cuts Rajoy has imposed during the last six months that have raised taxes, made it easier to hire and fire workers, and cut deep into cherished government programs, including education and national health care.
"It's obviously a shame," said civil servant Luisa Saraguren, 44, as she strolled on a sunny Sunday morning with her young daughter. "But this bailout was fully predictable, and the consequences of this help are going to be a lot bigger compared to the cuts we've been living with already."
Rajoy took pains to avoid the word bailout Sunday, saying Spain's rescue package is a line of credit that its most troubled banks will be able to tap. The assistance will not come with the outside control over government macroeconomic policy like that imposed Greece, Ireland, and Portugal when their public finances were bailed out.