BRUSSELS, Sept. 21 (UPI) -- European officials are working privately to prepare Spain to meet lender bailout demands ahead of a financial audit report, officials told the Financial Times.
The talks between Madrid and officials of the European Commission, the European Union's executive body, are intended to make sure Spain creates structural reforms, demanded by the European Union, European Central Bank and International Monetary Fund, in case Spain formally requests a bailout, the officials said.
This would essentially give Spain bailout preapproval before it asks, the officials said.
The details of the structural reforms were not disclosed. They are to be unveiled Thursday and will not focus on new taxes or spending cuts, the FT said.
"It is a kind of 'proto-program,' if such were needed," an official told the newspaper.
The day after the bailout program is made public, Spain is expected to announce results of a three-month review of its financial system.
The EC could still request more austerity measures next month to meet existing EU budget targets that Madrid is expected to miss, the FT said.
Spain's central bank said last week the country's public debt in the second quarter topped $1 trillion for the first time ever. The figure was equivalent to 75.9 percent of Spain's gross domestic product, 3 percentage points more than the same period last year and the highest ratio since 1913, when it stood at 77 percent.
EU preapproval of a bailout is intended to help Spanish Prime Minister Mariano Rajoy, the newspaper said. Rajoy has said he doesn't want a bailout because of the tough conditions it would imply.
European Central Bank President Mario Draghi said Sept. 6 the eurozone's central bank was prepared to buy Spanish and Italian government bonds in "unlimited" quantities, but only if a government asked for the help and only if it agreed to eurozone reform requirements.
Spanish officials have for months tried to get EU assistance without significant strings attached but have faced stiff resistance from Germany and other northern European countries.
Spanish officials are discussing a possible loophole -- using some of the $130 billion in promised bank-bailout money to buy Spanish sovereign debt, which would essentially mean getting sovereign bailout money through the back door with no strings, the FT said.
EU officials had no immediate comment.
Spain sold $6.2 billion of three- and 10-year bonds Thursday, more than the $5.8 billion it had estimated for the sale. The 10-year bonds were priced to yield 5.666 percent, almost a full percentage point below the 6.647 percent the bonds received at a similar auction Aug. 2.
The lower yields suggest investors are increasingly comfortable holding Spanish debt, economists say.
