Spain in pain

Spain cannot finance itself for long at the high borrowing rates it must currently pay to raise funds on financial markets, Prime Minister Mariano Rajoy told parliament on Wednesday.

"We cannot finance ourselves for a long time at prices like those we're now paying," Rajoy told legislators, as the yield on Spanish 10-year bonds traded at more than 6.8 percent.

At a two-day European Union summit starting on Thursday, Mariano Rajoy is expected to call on fellow member states to help stabilize financial markets with a view to easing conditions for Spain to borrow fresh money.

Madrid has been under enormous pressure by nervous markets to tame one of the highest public shortfalls in the eurozone. The government is working towards presenting an additional package of austerity measures at the Brussels summit. This is to underline its resolve to get on top of the crisis as Spain negotiates an international bailout for its ailing banks.

Rajoy had announced tax hikes and spending cuts worth 45 billion euros ($56.24 billion), but had for a long time resisted calls from EU and IMF officials to raise value-added tax (VAT).

But in an unexpected move just days before the summit, Madrid said it was now considering increasing the rates at least on some products and services.

hg/ncy (AFP, Reuters)