Bailout, Europe Debt Crisis | featured news

Spain’s conservative prime minister, Mariano Rajoy, is not known as a gambling man. But as Europe’s debt crisis stretches on, he is playing a tense game of chicken with the financial markets, betting that Spain can balance its books with homegrown austerity while putting off — maybe forever — a humiliating bailout from the European Union.

Spain is ready to request a euro zone bailout for its public finances as early as next weekend but Germany has signaled that it should hold off, European officials said on Monday. The latest twist in the euro zone's three-year-old sovereign debt crisis comes as financial markets and some other European partners are pressuring Madrid to seek a rescue program that would trigger European Central Bank buying of its bonds.

Euro zone states are preparing to allow the bloc's permanent bailout fund to leverage its capital in the same way as its predecessor so it can reach a capacity of more than 2 trillion euros and rescue big countries if necessary, Der Spiegel said on Sunday.

The German chancellor says it's a "good day for Germany and a good day for Europe". Better than that, it's been a good week. First, the European Central Bank delivered on its pledge to do more - possibly quite a lot more - to hold the euro together. Now the German constitutional court has ruled in favour the new European bailout fund, the ESM.

Angela Merkel reassured Greek Prime Minister Antonis Samaras on Friday that she wanted his country to stay in the euro zone, but gave no sign of ceding to his pleas for more time to meet the tough terms of Athens' international bailout.

At the start of another critical week for the euro, the head of the finance ministers that use the currency, Jean-Claude Juncker, reinforced expectations Monday of an initiative to lower Spain’s borrowing costs, which had hit alarming heights.

Political leaders in Greece have agreed on most of the austerity measures demanded by its creditors and are now eyeing pension and wage cuts to find the final 1.5 billion euros of savings still needed, a source close to the talks said on Sunday.

Spain has for the first time conceded it might need a full EU/IMF bailout worth 300 billion euros ($366 billion) if its borrowing costs remain unsustainably high, a euro zone official said.

Spain’s borrowing costs rose to record levels for a third consecutive trading day on Monday on concerns that a deepening recession and the financing problems of its regions would force the government to seek a full-fledged bailout.

Italy said on Tuesday it may want to tap euro zone aid to ease its borrowing costs as finance ministers struggled to convince markets they are getting a grip on the bloc's debt crisis, which a top European Central Banker said could escalate.