European finance ministers squared off over a possible aidprogram for Spain, with creditors unwilling to commit until thegovernment takes additional steps to boost competitiveness and ridthe economy of debt.

Spain, already drawing on 100 billion euros ($130 billion) torepair its banking system, wants the lightest possible conditionson a European credit line or loan program that would also enablethe European Central Bank to buy bonds to bring down its borrowingcosts.

“If there will be support, there will be conditions,” DutchFinance Minister Jan Kees de Jager told reporters before a meetingof euro-area finance chiefs in Nicosia, Cyprus today. “Spain is onthe right way but they have to continue to convince the marketsthat they have a sound policy.”

Spain's aid-or-no-aid dilemma comes with the euro at afour-month high and Spanish bond yields at five-month lows. As atprior stages in the almost three-year debt turmoil, politicalleaders run the risk of being lulled into a false sense of securitythat dilutes efforts to fix the economy.

“Europe is stabilized,” Austrian Finance Minister Maria Fektersaid. “We'll be equipped to deal with all phenomena that comealong.”

The euro rose as much as 0.5 percent $1.3054 today, the highestsince May 8. Spanish 10-year bond yields fell 5 basis points to5.58 percent, the lowest since April 3. The extra yield over Germanbonds narrowed by 12 basis points to 396 basis points.

Financial markets were boosted by the ECB's Sept. 6 offer — withconditions attached — to go on a bond-buying mission and a Sept. 12ruling by the German supreme court that cleared the way for thesetup of a 500 billion-euro permanent bailout fund.

Spanish Economy Minister Luis de Guindos continued to play fortime, saying that a bond-buying program won't be on the agendatoday and pointing to “important announcements” on economic reformsto be made in Madrid “in coming days.”

Finance ministers are also in a holding pattern on Greece, thefirst victim of the crisis. Greek Prime Minister Antonis Samaras isfacing hurdles within his coalition to proposed wage and pensioncuts to meet creditor demands for 11.5 billion euros in budgetsavings.

Until then, the next installments of Greece's 240 billion-euroaid package are on hold. Finance ministers today will hear aprogress report from the “troika” of the European Commission, theECB and the International Monetary Fund.

“We will today get informed about the interim situation,” GermanFinance Minister Wolfgang Schaeuble said. “When the troika reportis ready we will discuss the necessary consequences and decide, butnot now.”

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