Spain mulls bailout request as Merkel calls time on Greek funding

Spain is negotiating with eurozone partners over conditions for aid to bring down its borrowing costs, though the country has not made a final decision to request a bailout, three euro zone sources said yesterday.

The favoured option being discussed is that the existing European rescue fund, the EFSF, would purchase Spanish debt at primary auctions while the European Central Bank would intervene in the secondary market to lower yields.

No specific figure for aid has been discussed in the talks, which started several weeks ago, one of the sources told Reuters. The euro soared to a seven week high against the dollar in response to the news.

The report came as Chancellor Angela Merkel was expected to reject French demands to allow Greece more time to impose reforms required for further eurozone bailout funding at a meeting with President Hollande last night.

The two leaders were dining together in Berlin ahead of meetings with Greek Prime Minister Antonis Samaras. Ms Merkel is facing an election next year, and has stressed that she will not budge on the question of Athens.