Spain rejected any need for a full-blown bailout and claimed it had international support yesterday as its borrowing costs hovered dangerously near euro-era records.

Fears mounted among investors that exorbitant market rates could eventually force the eurozone's fourth-largest economy to seek an international rescue like Greece, Ireland and Portugal before it.

"Spain has not been rescued because it does need to be rescued. Spain has the support of its European partners and European institutions," Budget Minister Cristobal Montoro told parliament.

Spain's eurozone partners agreed June 9 to extend a loan of up to 100 billion euros ($125 billion) to salvage distressed banks, laden with bad loans extended during a real estate bubble that imploded in 2008.

Prime Minister Mariano Rajoy's conservative government refuses, however, to describe this aid as a rescue or bailout.

"A week ago, Spain was not rescued," Montoro said.

The minister hailed a Group of 20 summit in Los Cabos, Mexico, where leaders issued a statement saying they welcomed both Spain's plan to recapitalize the banks and the eurozone's loan.

"Spain has, as we found out last night, the express support of the G20 for the programs the Spanish government is pursuing, among them the recapitalization of the banking sector," he said.

Rajoy also said Spain was still negotiating the eurozone banking loan and said it would await two audits of the banks before finalizing its request.

The first audit by international consultants Roland Berger and Oliver Wyman, due today, is expected to reveal how much capital banks require to be able to withstand financial stress.

A second, more detailed study to be carried out by Deloitte, KPMG, PwC and Ernst & Young, is to look at the valuation of banking assets, and is due July 31.

Despite the Spanish banking rescue deal and weekend Greek elections, markets refused to let up on Spain.

The yield on Spanish benchmark 10-year government bonds shattered the 7 percent barrier on Monday for the first time since 1999.

AFP