High borrowing costs for some European countries compared with Germany's may justify market intervention by the European Central Bank, French President Francois Hollande said on Thursday.
"The ECB's mandate includes price stability and monetary policy. When you see such wide gaps in yields, that could be a justification for an intervention in the name of monetary policy," Hollande told a news conference after meeting with Spanish Prime Minister Mariano Rajoy in Madrid.
European Central Bank President Mario Draghi is expected to flesh out his plans next week for a bond-buying program he announced in August, conditioned on countries first applying for aid to the eurozone's rescue fund.
On Wednesday he wrote in an opinion piece in a German magazine that the ECB must employ "exceptional measures" at times.
Rajoy, of the centre-right People's Party, reiterated after his meeting with Hollande, a Socialist, that he is waiting to hear more about the program before deciding whether his country will apply for European aid.
A rescue from Europe would likely combine ECB buying of Spanish bonds on the secondary market with the European rescue fund, or EFSF/ESM, buying Spain's debt issues at primary auctions.
The aid would likely come with additional conditions beyond what has already been imposed on Spain in return for up to 100 billion euros ($125.28 billion) in European aid for Spanish banks that is in the pipeline.
It is up to Spain to decide whether it wants to request further aid, said Hollande.
Both leaders expressed their backing for Greece as it struggles to implement tough measures that were conditions for its sovereign bailout, the first one in the eurozone.
European leaders should show support for Greece at an Oct. 19 EU summit if the crisis-hit country's conservative government shows commitment to move ahead with economic reforms, Hollande said.
Rajoy, who has raised income tax and value-added tax in Spain this year, said he would try not to raise taxes in next year's budget, although he said difficult decisions were sometimes necessary.
Rajoy has announced 65 billion euros in budget cuts to try to bring the public deficit down to 3 percent of gross domestic product by 2014. But with the economy in recession, tax take dropping and the jobless rate stubbornly high at close to 25 percent, more painful austerity may still be in the works for Spain.
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