Pressure grew for European regulators to publish results of stress tests on individual banks to restore market confidence and overcome a partial freeze in inter-bank lending. Such tests show banks' ability to withstand liquidity problems.

On the eve of a European Union summit in Brussels that was expected to approve tougher fiscal rules to prevent a repetition of the Greek debt crisis, the European Commission and the International Monetary Fund denied Spain was about to seek financial help.

The risk premium demanded by investors to hold Spanish debt rather than benchmark German bonds rose to a euro lifetime high of 223 basis points because of bailout rumors before a closely watched Spanish bond auction on Thursday.

Spain won praise from German Chancellor Angela Merkel after the cabinet in Madrid approved a decree to overhaul rigid hire-and-fire laws intended to restore economic competitiveness.

EU leaders denied a report in the Spanish business newspaper El Economista that the United States, the EU and the IMF were preparing a 250-billion-euro (US$308.6-billion) credit line for Spain.

French and German officials said Spain's fiscal problems were not on the agenda of Thursday's one-day EU summit on fiscal and economic reforms and Portugal's prime minister said his country did not need financial help.