MADRID: The European Union must help nations facing financial difficulties, Spanish Prime Minister Mariano Rajoy said Tuesday as Madrid faces ever higher borrowing costs on bond markets.
"Europe must say where it is going, to give itself unity, it must say that the euro is an irreversible project that is not in danger, it must help nations in difficulty," he told the Spanish senate.
"In my opinion it needs fiscal integration, with a fiscal authority, and banking integration, a banking union with eurobonds, with a banking supervisor and a European bank deposit guarantee fund."
Spain wants the EU to allow the European Stability Mechanism (ESM) bailout fund -- due to come into force in the coming weeks -- to recapitalise troubled banks.
The fund is intended to be used to help finance debt-ladened governments and not banks.
Madrid would prefer to tap the fund to help its ailing banks instead of requesting a Greek-style bailout from the EU and the International Monetary Fund, which would come with a politically humiliating austerity programme attached to it.
Rajoy said Spain's "most urgent" problem right now is its difficulty in financing itself because of the steep risk premium demanded by sovereign bond investors.
"It is very difficult to refinance ourselves. Spain is in an extremely difficult situation," he said.
Spain's sovereign debt risk premium -- the extra return investors demand to hold Spanish bonds over their safer German counterparts -- stood at 5.23 percentage points on Tuesday, near a euro-era record of 5.48 percentage points struck last week.
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