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 (Nama).

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 that 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 Spanish banks.

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

Mr Bacon said: “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.”