Spain not mulling seeking further EU help: sources

Thu Jul 26, 2012 6:07am EDT
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By Julien Toyer

MADRID (Reuters) - Spain is not considering seeking immediate help from the European Union to ease its spiraling borrowing costs, two Spanish sources said on Thursday, although the euro zone is eyeing possible action for later this year.

With the troika of international lenders due to report back to European authorities on the parlous situation in Greece in September and a challenging autumn in terms of funding for Madrid, top euro zone policymakers are discussing ways to shield the currency union from further contagion.

Spanish borrowing costs this week hit record highs since the launch of the euro 13 years ago, while Italy's are back at levels not seen in several months.

Spain's 10-year bonds were trading at around 7.4 percent on Thursday, down from around 7.7 percent in previous days, although this level is still seen as unsustainable.

Sources in Madrid denied German and Italian newspaper reports on Thursday that it was on the point of asking the euro zone's EFSF rescue fund for help via buying bonds.

"Neither a total rescue of the Spanish economy nor a bond-buying program from the EFSF is being looked at," said one of the Spanish sources.

Another source said the government was focused on getting the decisions from the last European union summit implemented as well as on recapitalizing its banks for which it sought an up to 100-billion-euro European credit line in June.

"We have to respect the times, the rhythms. Spain sought aid for the banks on June 9 and we only signed the final agreement this week ... The government is not looking at that (further rescue)," said the second source.   Continued...

Civil servants hold "No to cuts" placards as they take part in a protest against government austerity measures outside Madrid's town hall July 25, 2012. REUTERS/Susana Vera