(MoneyWatch) The eurozone leaders gathering for this week's summit may have even less time to act than they thought. While Spain's long-term borrowing costs are just shy of the critical mark, its short-term costs are now far past what Ireland and Portugal were paying when they asked for bailouts.
A lot of attention is being given to the interest rate for Spain's 10-year bonds, which closed Wednesday at 6.9 percent. That is because Greece, Ireland and Portugal all had to seek international aid within a month of hitting the 7 percent mark. Spain's 10 years traded above 7 percent for the first time on June 18.
However, it is Spain's 5-year bonds which are now worrying investors. On Wednesday they closed at 6.38 percent - not too far behind the 10-years. When Portugal and Ireland asked for international relief their 5 year bonds were both under 5 percent. Greece's 5-year bonds hit the 6 percent mark in March of 2010, three weeks before Athens asked for its first bailout and at a time when its 10 year bonds were still below 7 percent.
At an auction on Tuesday, Spain's shortest-term borrowing costs nearly tripled. The yield paid on a 3-month bill was 2.362 percent, up from just 0.846 percent a month ago. Six-month bonds hit 3.237 percent from 1.737 percent in May.
EU leaders are convening a two-day summit in Brussels to address the crisis on Thursday. However with German Chancellor Angela Merkel continuing to oppose jointly-issued eurobonds, analysts expect little to come out of the meeting.
Many experts say eurobonds are the answer to the EU's problems as they would allow help lower indebted countries' borrowing costs, easing the risk they may need a bailout. But Germany is reluctant to expose itself to new potential costs and is concerned that eurobonds may ease the pressure on countries like Greece and Spain to reform their economies.
It is also uncertain if the EU would be able to put together the bonds in time to help Spain. Other solutions, including tighter economic and political cooperation, would take even longer to enact.
-- The Associated Press contributed to this report.