Spain denies asking for further rescue

MADRID - Spain is not in negotiations for more rescue other than the already agreed credit line for its troubled banks, Deputy Prime Minister Soraya Saenz de Santamaria said Friday.

The remarks were made in response to a Reuters report wired Thursday that Spain was in talks with other eurozone countries to bring down its painfully high bond yields.

According to the report, a favored option being discussed was that the European rescue fund would purchase Spanish bonds at primary auctions while the European Central Bank (ECB) would intervene in the secondary market.

Yet the report was later denied by a spokesman for the European Commissioner for Economic and Monetary Affairs and the Euro. The spokesman said the commission was not in any negotiations with Spain beyond the aid to the banks.

"There is no negotiation under way... The spokesman for economic affairs says it and I confirm it today," the Spanish deputy prime minister said Friday after a cabinet meeting.

Spain received a 100-billion-euro ($125-billion) credit line from its eurozone partners in June to shore up its debt-laden banking system. However, Spain's efforts to reconstruct the banking system are not running smoothly. The European Commission on Thursday asked Spain to delay unveiling a banking reform by a week to allow further studies.

Spain has been considering creating a "bad bank" to keep toxic assets stripped off commercial banks, which accumulated a total of 200-billion-euro bad property loans during a decade-long housing bubble.

Investors are weighing the possibility of a similar sovereign bailout of Spain like Greece, given Spain's soaring borrowing cost, which reached an unsustainable 7 percent last month.

ECB President Mario Draghi said the central bank could intervene to lower the borrowing cost of weaker members only if the country concerned asked for similar help from the bloc's rescue fund first.

Spanish Prime Minister Mariano Rajoy said earlier this month he needed to know what conditions would be attached before asking for an EU intervention on bond yields.

Spain is under pressure to move faster as ratings agency Moody's is due to review the country's credit rating in mid-September and government bonds could lose their investment grade status.

The ECB's governing council is set to meet on September 9 possibly to discuss the issue of setting target bands for bond yields under a new bond-buying program to ease the rising borrowing costs in southern members.