Spain fears harsh rescue terms from AAA Nordic parliaments Our national law on the ESM is very tight. If the budgetary risks for Finland increase, or if there is any change to the ESM's preferred creditor status, we will have to evaluate it," she told The Daily Telegraph. True Finn leader Timo Soini said the parliament would demand high-quality collateral from Spain, complicating any deal. Don't underestimate the fury of Finnish taxpayers. Almost everybody here thinks the bail-out policies have failed and that we are paying to rescue French and German banks," he said. The mood in Germany's Bundestag has become tetchy and unpredictable. Chancellor Angela Merkel faces a simmering mutiny from the Free Democrats (FDP) and Bavaria's Social Christians (CSU) in her own coalition. She can push through a rescue with votes from opposition Social Democrats (SPD) but electoral politics is intruding. All key parties agree in any case that EU-IMF Troika discipline in Ireland and Portugal would collapse if Spain secures softer terms. Everything will fall apart unless the conditions imposed on Spain are extremely tough. Madrid should have no illusions about this," said one German policy-maker. Giles Merritt from Friends of Europe in Brussels said the mood is poisonous. The Bundestag feel they are being jerked around by the Spanish and the Greeks. It is impossible to know how they are going to react," he said. The dispute comes as Euroland slides deeper into slump. The Markit PMI index for services fell to a 38-month low of 46.1 in September, below the contraction line of 50. Spain plunged from 44.0 to 40.2. France's broader composite index crashed from 48.0 to 43.2, the worst since March 2009. Capital Economics expects the eurozone to shrink by 2.5pc next year. Portugal has unveiled an extra levy of 4pc on incomes to meet deficit targets after bowing to protests last week to ditch a hated surtax on social security. The complex brinkmanship between Spain and northern creditors risks going badly awry. Mr Rajoy is determined to avoid a humiliating loss of control, believing he has already done enough by pushing through labour reforms and fresh austerity in concert with Brussels. But the decision will not be made by Brussels. Real power resides with the AAA democracies. Catalonia's finance chief Andreu Mas-Colell said the creditors would impose changes to the pension and health system, but demands would "not be obsessive." Mr Rajoy says Spain will not accept a rescue unless terms are "reasonable" and every eurozone country is on board. It is unclear how he can resist for long unless he is willing to play the "Argentine" card, leave EMU, and default to foreign creditors. The International Monetary Fund says Spain's funding needs will rise to 23pc of GDP next year. This may be higher after the AAA-bloc reneged on a June summit deal to let the ESM recapitalise Spain's crippled banks directly. Chancellor Merkel is reportedly so concerned events could slip out of control that she is encouraging Madrid to delay a request. Berlin fears that political patience may snap if the Bundestag is asked to vote on serial bail-outs for Spain, Cyprus and probably Slovenia, as well as fresh demands for Greece. It hopes to lump everything together in a single package. Cyprus has not helped its cause by trying to raise €5bn from Russia in an open attempt to extract better terms. The hard-Left AKEL goverment has rejected the first set of Troika proposals as too harsh. AKEL party leader Andros Kyprianou has caused consternation by describing Troika packages as a recipe for "deep recession" and failure. He said Cyprus should "dig in its heels" and threaten to leave the euro.