collapsed merger of four savings banks could be a setback for the Spanish government’s efforts to convince the rest of the world that its financial house is in order.

Late Wednesday, the merger of four savings banks, to be called Banco Base, collapsed after Cajastur, Caja Cantabria and Caja Extremadura all backed out.

That came after key partner Caja Mediterraneo (CAM), which has heavy exposure to the Spanish property collapse, applied for a cash injection of state funds on Tuesday which was twice what the Bank of Spain had estimated it needed.Those four savings banks will now have to present new plans for capitalization to the Bank of Spain. CAM said in a statement late Wednesday that it will apply for state funds to meet necessary capital requirements, but many believe that it will be sold off to bigger institutions.