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Spain bond sale to test market confidence Spain bond sale to test market confidence
(39 minutes later)
Spain will try to raise money on credit markets on Thursday days after it said it was all but blocked from them.Spain will try to raise money on credit markets on Thursday days after it said it was all but blocked from them.
The planned move - a test of market confidence in its ability to pay - comes amid reports Spain has been seeking a bailout from eurozone funds.The planned move - a test of market confidence in its ability to pay - comes amid reports Spain has been seeking a bailout from eurozone funds.
Meanwhile European authorities are said to be working on a way to help Spain's troubled banking sector.Meanwhile European authorities are said to be working on a way to help Spain's troubled banking sector.
UK Chancellor George Osborne said: "I know they are working very hard on an imminent solution."UK Chancellor George Osborne said: "I know they are working very hard on an imminent solution."
He told the BBC: "I am optimistic that people are working hard on a solution, and a solution, I think, is coming."He told the BBC: "I am optimistic that people are working hard on a solution, and a solution, I think, is coming."
Spain's economy minister on Wednesday dampened speculation of a bailout. Hopes of a swift resolution have pushed down the yields on Spanish bonds on Thursday, which are taken as an indicator of the amount countries have to pay to borrow money.
The US president spoke separately on Wednesday to German Chancellor Angela Merkel and Italian PM Mario Monti to discuss economic conditions in Europe. The yield on Spanish 10-year bonds fell below 6.1%, having recently risen above 6.7%.
Barack Obama also called jointly with UK Prime Minister David Cameron for an "immediate plan" to restore confidence. Spain is keen to avoid a full international bailout, which would be politically damaging and come with strict economic conditions.
The prime minister is due to meet Mrs Merkel on Thursday to discuss the issues. It favours a bailout targeted directly at its banks, rather than at central government.
Spain will try to raise $2bn (£1.3bn, 1.6bn euros) in bonds in a test of market confidence in its ability to pay. German Chancellor Angela Merkel will be meeting UK Prime Minister David Cameron later in the day.
On Wednesday there were signs that investors were slightly more hopeful with the premium investors demanded above German bonds falling below 5 percentage points for the first time in a week. Ahead of the meeting, she has been talking about the need for Europe to have more power.
Spain's finance minister said on Tuesday that the credit markets were "effectively shut" to his country, inflaming worries that it will not be able to avoid seeking outside help. "We need not just a currency union; we also need a so-called fiscal union, more common budget policies," she said.
"We need above all a political union. That means that we must, step by step as things go forward, give up powers to Europe."
She spoke on Wednesday to US President Barack Obama, who also called Italian Prime Minister Mario Monti to discuss economic conditions in Europe.
Mr Obama and Mr Cameron also called jointly for an "immediate plan" to restore confidence.
Spain will try to raise $2bn (£1.3bn, 1.6bn euros) in a bond auction on Thursday.
As the return demanded by investors to lend to Spain has risen, Spain's finance minister said on Tuesday that the credit markets were "effectively shut" to his country.
But the BBC's Tom Burridge in Madrid said that Spain would be hoping that demand for its debt is high and the borrowing rates it pays at the auction are low.
If the reverse is true, then it will only further fuel rumours, so far denied by the Spanish government, that the country will have to seek some form of international assistance for its banks, our correspondent said.
Spain has to find at least 80bn euros to strengthen its banks, which are struggling because of bad property loans.Spain has to find at least 80bn euros to strengthen its banks, which are struggling because of bad property loans.