Spanish PM: No decision on bailout

Spanish Prime Minister Mariano Rajoy has said he would only consider asking for financial aid for his country once the European Central Bank (ECB) has fleshed out its crisis-fighting plans for buying government bonds.

This is the closest the leader has come to admitting he is considering a bailout after months of denials. Speaking to reporters, Mr Rajoy urged Europe's leaders and the ECB to speed up the introduction of key reforms to fight the debt crisis and strengthen the struggling banking sector.

"I haven't made a decision (on a bailout) yet," Mr Rajoy said after a cabinet meeting. "I want to know what the unconventional measures proposed by the ECB are. We do not know what is being proposed."

Mr Rajoy was speaking a day after the ECB warned it would only help lower a country's borrowing costs if that country's government applied for rescue aid from the rescue funds set up by the 17 countries that use the euro.

The ECB's announcement initially sent Spain's borrowing costs spiralling again as investors expressed their disappointment and continuing concern over whether Spain can manage its finances and pay its debts.

Spain's borrowing costs have risen sharply for all bond types in recent months as the uncertainty over whether the country can afford to contain the problems in its banking sector and indebted regional governments has continued unabated.

The interest rate, or yield, on Spain's benchmark 10-year bond was at 6.82% just after Mr Rajoy spoke - dangerously close to the 7% level, which many market-watchers consider unsustainable in the long term. Such rates could likely push Spain to seek a bailout, deepening Europe's financial woes and sending repercussions to economies beyond the continent.

The yield had dropped to 6.5% last week after ECB chief Mario Draghi first intimated he would apply measures that would help ease the pressure on borrowing costs. By comparison, the rate demanded by investors for Germany's more trusted 10-year bond was 1.34%.

Mr Rajoy also told reporters that he had sent a letter to European Council President Herman Van Rompuy and his European Commission counterpart, Jose Manuel Barroso, calling for recent proposals for greater EU banking union to be approved in December.

Spain is in its second recession in three years with an unemployment rate of nearly 25%. But many of its 17 regional governments are now starting to run out of money while austerity measures and labour reforms brought in to try to calm financial markets and appease EU partners are stifling the economy.