U.S. President Barack Obama and British Prime Minister David Cameron called on Europe Wednesday to come up with an "immediate plan" to resolve the eurozone crisis while Germany rejected a Spanish plea for help.
The European Central Bank also refused to offer recession-hit eurozone economies an easy-money boost, keeping interest rates steady at 1%, but stock markets and the euro rebounded on hints it may act.
European leaders are under intense pressure to take bold action to try to resolve the two year old crisis at a June 28-29 summit.
Obama and Cameron kept up that pressure, agreeing in a telephone call "on the need for an immediate plan to tackle the crisis and to restore market confidence, as well as a longer-term strategy to secure a strong single currency," a Downing Street spokeswoman said.
Teetering Spanish banks are now the urgent focus with Madrid asking for deeper eurozone integration so European funds can be directly pumped into lenders, thereby avoiding the Irish trap where saving the banks forced the country into a massive bailout.
Spanish Finance Minister Luis De Guindos signalled Madrid will have to move quickly, making a decision within the next two weeks on how to help its lenders who are struggling to raise 80 billion euros ($100 billion) in fresh capital to shore up their books.
Europe "must help nations in difficulty," Spanish Prime Minister Mariano Rajoy told lawmakers on Tuesday as he called for a list of EU reforms viewed with suspicion by Germany including deposit guarantees, a banking union and eurobonds.
The proposal gaining the most traction outside Germany is to integrate the eurozone's national banking systems, which would sever the link between banks and sovereign finances.
But powerhouse Germany resisted the pleas, saying whatever help the EU can provide to an increasingly desperate looking Madrid should come from tools, and according to rules, that exist already.
Government spokesman Steffan Seibert said the reforms asked for by Rajoy required long-term changes beforehand, reiterating that only governments can apply for cash from the European bailout funds.
"These instruments must be applied for by governments ... whether a government wishes to apply is purely a matter for the government," Seibert said.
A leading member of Chancellor Angela Merkel's coalition, Free Democrat Christian Lindner, sarcastically called the banking union idea "a new, admittedly creative, way to tap German solvency."
Merkel also signaled she is no mood for a quick compromise, praising the virtues of German perfectionism as a national strength.
"Because we are not easily satisfied, we have been successful in many areas," Merkel told a citizen's forum on Germany's future.
Spain has so far refused to seek financial assistance from the European Union that would come to the government with tough strings and a politically humiliating austerity program attached.
But some kind of rescue for Spain was beginning to emerge and French Finance Minister Pierre Moscovici said EU partners are ready to "mobilize very rapidly" to come to Madrid's assistance.
According to the German daily Sueddeutsche Zeitung, a compromise under discussion could see European Union aid paid to the Spanish state-backed Fund for Orderly Bank Restructuring (FROB).
Madrid in turn would push through mergers or closures of weakened Spanish banks, the German newspaper said Wednesday.
The report said this course would preserve Madrid's sovereignty and uphold the German position that EU funds should be paid only to public institutions.
But a Madrid newspaper reported Wednesday that the EU will demand as part of any bailout that Spanish banks set up a new, multi-billion-euro cushion against home mortgage failures, which they have not been required to do so far despite daily headlines of home evictions and unemployment soaring to a record at 24.4% in the first quarter of 2012.
ECB chief Mario Draghi sought Wednesday to calm fears, saying the eurozone debt crisis is "far" from as bad as the global market meltdown in the wake of the 2008 collapse of U.S. investment bank Lehman Brothers
"We are rightly alarmed but I would say that we are still far away from that situation," he said.
Draghi said some of the current problems "have nothing to do with monetary policy," and urged European leaders to set out a vision for where they want eurozone to go at their summit later this month.
He also noted that a small number of governing council members had been in favor of a rate cut Wednesday and this cheered markets, with London stocks jumping 2.36%, Frankfurt 2.09%, Paris 2.42%, Madrid 2.41% and Milan 3.50%.
The European single currency rose sharply to $1.2547 from $1.2450 late on Tuesday.
Analysts had widely expected the ECB would hold off cutting interest rates until at least next month, when the outcome of Greece's second parliamentary elections in six weeks will be known with its eurozone future at stake.
Copyright Agence France-Presse, 2012