EU authorities are working behind the scenes to pave the way for a new Spanish rescue programme and unlimited bond buying by the European Central Bank, by helping Madrid craft an economic reform programme that will be unveiled next week.

According to officials involved in the discussions, talks between the Spanish government and the European Commission are focusing on measures that would be demanded by international lenders as part of a new rescue programme, ensuring they are in place before a bailout is formally requested.

According to the FT, the plan will be unveiled nest Thursday.

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Markets like the idea of the ECB and EFSF buying Spanish bonds and perversely, a bailout would be euro bullish, at least in the short-term.