Spain could learn lessons from Ireland’s handling of its banking crisis, according to economic consultant Peter Bacon, the architect of the National Assets Management Agency.

In an interview with the Wall Street Journal,  Mr Bacon said Spanish banks had not yet recognised the scale of their bad loans, which was keeping confidence from returning to the market.

Mr Bacon said the Nama model, which established a bad bank to help the financial institutions remove toxic loans from their books, was the best chance to help reduce the level of doubt surrounding the banks.

Nama has removed more than €74 billion in bad loans from Ireland’s banks at a discount.

“The principal lesson Spain could draw from Ireland’s experience is that painful as the Nama outcome is, it is probably better in the longer run than the kind of approach that has been followed by Spain and other countries that has really failed to provide for the losses on banks’ books that resulted from property bubbles,” he said.

Spain has been the subject of much speculation in recent months that it would need to seek a bailout from the EU and IMF.

“What has become apparent is that you cannot muddle through. And I think that is why Spain is back looking at the extent of its property losses,” Mr Bacon said. “Spanish banks are certainly not likely realising anything like the losses that are in fact sitting on their balance sheets in respect of their property losses. I am saying that from my experience of Irish banks."

Not all Spanish banks are badly impaired, he said. “But it is worth pointing out that some of the internationally-focused Spanish banks are probably suffering unduly because they are being tarred with the one brush.”

Mr Bacon said he was not confident that the Spain’s banks would have the means to solve their debt crisis without help, describing the necessary solution as “euro zone wide”.