The outflow has resulted from domestic banks sending money abroad, foreign lenders pulling out cash and mostly non-resident investors dumping Spanish assets. The steep rise was likely due to Bankia the banking conglomerate, having requested a bailout in May.

Over the last 11 months, funds equivalent to 26% of GDP exited the country, Tuesday's data from the Bank of Spain showed.

With tax revenues falling sharply as the recession deepens, Spain reported a deficit of 4% of GDP on its central government accounts in the first half of the year, above a goal of 3.5% set for the whole of 2012.

That target could be eased as Spain decides later in the year how to use an extra one percent cushion granted by the European Union in July when the country's deficit target was widened to 6.3% for 2012 from 5.3% initially.

Spain's struggling economy, which is expected to remain in recession well into next year, is now at the centre of the Euro crisis. Skyrocketing borrowing costs risk shutting the country out of international debt markets.

EU officials are increasingly worried that if Spain, the Euro zone's fourth largest economy, needs a full bailout, financial markets will target Italy, which is too big to be rescued.

Reports on Tuesday said France and Italy were proposing giving the permanent bailout fund, the European Stability Mechanism, a banking license which would equip it with unlimited firepower because it could borrow funds from the European Central Bank using government bonds as collateral.

Germany opposes such a plan, arguing that it would stoke inflation and lead to an indirect collectivization of debts. It would also see countries receive help without having to do anything in return.

MercoPress