Euro zone finance ministers will discuss on Friday if Spain should ask for financial support after the announcement of the European Central Bank's new bond-buying program brought Madrid's borrowing costs sharply lower.
For the first time since the start of the year the ministers' talks will take place at a time when market pressure for immediate action to solve the euro zone sovereign debt crisis is easing, rather than mounting.
ECB's announcement last week that it could buy unlimited amounts of Spanish bonds, should it apply for help from the euro zone bailout fund, brought Spanish 10-year bond yields down from 7.64 percent on July 24 to 5.62 percent on Thursday.
Yields of Italy, under similar market pressure since the start of the year, fell from 6.6 percent on July 24 to 5.03 percent on Thursday.
But many policymakers believe that for yields to fall lower, or even remain at these levels, the ECB would have to show its promises are not empty.
The bank can only do so if Spain makes a formal application for the euro zone to buy its bonds at primary auctions and accept the reforms that such aid would be conditional upon, freeing the ECB to intervene on the secondary bond market.
Spain does not want to ask for financial help because Prime Minister Mariano Rajoy fears the political backlash at home, but he may eventually have no other choice.
"There will be a discussion if they will ask for help or not. After the ECB announcements there is bigger pressure on the Spaniards to apply," one euro zone official said of the talks in Cyprus, itself a candidate for a bailout.
Read more: http://www.reuters.com/article/2012/09/14/us-eurogroup-idUSBRE88C1JE20120914
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