Prime Minister Mariano Rajoy said his country urgently needed financing and liquidity and could not continue with the current high borrowing rates, ahead of the European Union summit being held on Wednesday, according to the Associated Press.
Speaking in Paris, with new French President Francois Hollande by his side, Rajoy suggested that the European Central Bank should resume emergency measures such as buying bonds from weaker countries, which would lower their borrowing rates, reported the AP.
Spain's economy is in recession and the banking system needs restructuring, while fears grow that Spain will also need a bailout.
Bankia, the country's largest bank, will need to find 7.5 billion euros by the end of the year to cushion itself from the real estate bubble bursting, said Reuters.
Rajoy said Spanish banks would not need bailouts, but said the high interest rates that Spain had to pay were unsustainable, according to the BBC.
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Hollande said, "The top priority is injecting liquidity into the European financial system to ensure that European banks, all European banks, can be consolidated," according to the BBC.
Hollande and Rajoy said it was vital for Greece to remain in the eurozone.
Hollande, who did not hold a pre-summit meeting with German Chancellor Angela Merkel, said he would push for eurobonds, debt guaranteed by all EU members which would cut high borrowing costs and encourage lending, according to the BBC.
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Merkel is firmly opposed to such borrowing to stimulate growth and Dutch Finance Minister Jan Kees de Jager, who agrees with her, said, "It would now be a perverse incentive for countries which are in trouble to not reform and not cut spending."
Another EU diplomat said, "Introducing eurobonds is the equivalent of ringing the bell for a happy hour so the inebriated can postpone their hangover indefinitely," according to Reuters.
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