ECB rates decision due amid uncertainty over Spain bank debt

European finance ministers promised last night to respond "speedily" to the eurozone debt crisis after Spain pleaded for help to prop up its struggling banking system and avoid a bailout.

G7 ministers spoke by phone yesterday, amid criticism that there has been no sense of urgency by the leaders to the Eurozone debt crisis.

The contacts yesterday were part of the build-up to next week’s G20 summit in Mexico, where world leaders will again attempt to agree a way through the problems.

Fears have been mounting over Spain’s ability to raise funds on international markets at affordable levels.

Ahead of a planned trip to the markets by Spain tomorrow, their budget minister admitted the cost of borrowing had effectively shut the country out of the markets. Prime minister Mariano Rajoy had been insisting it wants EU money to fund its banks without conditions being placed on the government and a troika review every three months.

Meanwhile the European Central Bank meets this lunchtime when its board is expected to consider a cut to interest rates.

Some analysts see any decision to leave the key lending rate unchanged at 1% as a signal that a quarter of a per cent cut may be on the cards for next month.

But Chief Economist at Ulster Bank Simon Barry thinks there are too many uncertain factors for the ECB to bring any relief for borrowers.

"The Spanish situation remains extremely fluid and clearly we face big potential risks stemming from what happens in the Greek elections later this month," Mr Barry said.

"We also have the EU leaders' summit later this month.

"When you put all of this into the mix, the ECB may… want to just stand back, acknowledge the downside risks, but maybe not move today."