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Hollande, Rajoy call for action to cut borrowing costs

The leaders of France and Spain expressed their support on Thursday for the idea of the European Central Bank (ECB) buying up sovereign debt, in order to bring down borrowing costs for the eurozone’s weaker economies.

"The ECB's mandate includes price stability and monetary policy," French President Francois Hollande said, following a meeting with Spanish Prime Minister Mariano Rajoy in Madrid. "When you see such wide gaps in yields, that could be a justification of an intervention in the name of monetary policy."

Rajoy echoed Hollande's comments, and said that it was important to "bring an end to this situation in which some countries finance themselves at zero percent and other countries finance themselves at very high prices."

Investors demanded more than 6.6 percent interest to hold Spanish 10-year bonds on Thursday, while similar German debt was going for just 1.32 percent.

Spain's high borrowing costs have fuelled speculation that Spain may soon become the next country to seek a financial bailout. Earlier this month, ECB President Mario Draghi announced plans to purchase sovereign debt from troubled eurozone economies - but only if they first apply for aid from the bloc's rescue fund. Rajoy said on Thursday that he wanted to hear the details of Draghi's plan before deciding whether to apply for aid. Draghi is expected to unveil the details next week.

Meanwhile, the head of one of the smallest economies in the eurozone expressed doubt about the future of the common currency.

"I see a 50 percent possibility of the eurozone splitting and a 50 percent chance of its survival," Slovakian Prime Minister Robert Fico told reporters in Bratislava.

He also said that calls for closer integration would lead either to the "strengthening of the European Union and the eurozone or its split."

pfd/jr (AFP, Reuters, dpa)