Spain, Italy reject rescue, welcome ECB announcement

Spain and Italy, the shakiest big economies in the eurozone, rejected Thursday the need for a financial rescue and vowed to work more closely to solve the long-running debt crisis.

Spanish Prime Minister Mariano Rajoy and his Italian counterpart Mario Monti also welcomed the European Central Bank's announcement that it may may resume government bond purchases to help bring down high eurozone borrowing costs.

"It is a positive statement," Rajoy told a joint news conference in Madrid.

Markets were disappointed however by the ECB announcement, with stocks down sharply, especially in Madrid and Milan, after investors had expected the bank to take immediate action on the debt crisis.

ECB head Mario Draghi said the ECB "may undertake outright open market operations of a size adequate to reach its objective" to drive down soaring borrowing costs.

He also said the bank "may consider" further measures to bring markets under control as borrowing costs in Italy and Spain spiked back near to levels that forced Greece, Ireland and Portugal to seek massive bailouts.

Monti also welcomed the ECB's announcement.

"I think the ECB is highlighting that it will meet our objectives. The ECB president said the central bank should take the necessary actions," he said.

Despite deepening market turbulence, the leaders of both nations insisted they would not be seeking a financial bailout.

"In the case of Italy there will be no aid in the form of a bailout," Monti said, adding that he would of course look at efforts, by the ECB, to bring down eurozone borrowing costs.

"Actions to prevent a country's borrowing costs becoming too expensive, these types of aid we should study," he said.

Asked if Spain would seek a full bailout for the country, Rajoy said Madrid would study the new measures which Draghi said the ECB may take.

"I am not going to do anything different than what I have been doing in previous months," he added.

Spain secured an EU 100 billion euro ($123 billion) credit line recently for its banking sector but has repeatedly rejected the need for a full bailout.

Asked if Spain and Italy would jointly ask for a financial rescue, Monti said: "We did not discuss it."

Madrid and Rome also vowed to work more closely to resolve the eurozone debt crisis.

"The two countries want to work together. We are going to continue and consolidate out close cooperation with the aim of ending the crisis that affects us," Rajoy said.

"We are conscious that we are demanding great efforts from our citizens but we know that is the only way out," he added.

Both Spain and Italy have slashed public spending and raised taxes to bring their finances under control and lower their borrowing costs, prompting angry street protests.

"The solution can only be found if we all do our homework," said Monti.