Prime Minister Mariano Rajoy is fighting to prevent his country becoming the latest and biggest victim of the economic crisis crippling the 17 countries that use the euro and asking for a full-blown government bailout.
The clock is ticking for the country, which is finding fewer and fewer buyers for its debt, sold on the market as bonds. Investors are charging the country increasingly higher rates so that it can borrow the money it needs to keep the economy and public services working.
Investors have taken flight as the uncertainty over the whether the country can afford to contain the problems in its banking sector and indebted regional governments continues unabated.
As demand falls for a country's bond, its price falls and the interest rate the country would have to pay to sell it rises.
On the secondary market, where bonds are traded, the interest rate Spain would have to pay on 10-year debt has hovered around 7 percent for weeks. Most market-watchers think borrowing at an interest rate of 7 percent is unaffordable for a country in the long-term. And it's also the pain threshold that eventually compelled Greece, Ireland, and Portugal to request billion-euro bailouts.
The 7 percent interest rate is "a totem, because it shows a total lack of confidence in the country," says Matteo Cominetta, a European economist at UBS.
"The problem is that rates at that level kill the economy and basically make any growth impossible," he said. "The road is getting narrower and narrower and in the end (Spain) will have to ask for an intervention."
Investors are fretting over whether Spain will be able to repay its loans, and the country could end up being shut out of vital international debt markets.
High borrowing costs mean fewer funds for investment, and government austerity policies meant to save money to pay the increased interest rates could choke off growth.
In a bond auction last week, Spain sold $127 billion in 10-year bonds at an average interest rate of 6.65 percent and (euro) $125 billion in four-year bonds at a rate of 5.97 percent, up from 5.54 percent.
Analysts reckon Spain has enough funds to manage its debts until next year. It has already managed to sell off 72 percent of its targeted $105 billion in medium- and long-term debt for this year.
The Spanish Treasury has managed, for now, to build up a war chest that would save it from having to go to the bond markets too often and pay over the odds.
"Spain, right now, has some leeway," says Ishaq Siddiqi, an analyst at ETX Capital in London.