Germany and Spain's leaders vowed Thursday to restore battered trust in the euro but danced around the elephant in the room: growing expectations of a Spanish sovereign bailout.
Chancellor Angela Merkel pressed for political action to reinforce the euro as she flew to Madrid in support of Prime Minister Mariano Rajoy's battle against deep debt and banking crises.
"We have to restore confidence in the euro as a whole so that the international markets have confidence that member countries will fulfill their commitments," Merkel told a joint news conference.
"We want to dispel any doubts on the markets about the continuity of the euro," added Rajoy.
"We will do what it takes to definitively resolve the euro crisis," he promised.
But at moments the gathering almost seemed like a sideshow to another, simultaneous meeting in Frankfurt where the European Central Bank set out its plan to help stricken eurozone states by purchasing their bonds.
The ECB confirmed it will make unlimited purchases as needed of government bonds on the secondary markets to curb interest rates of stricken members, but with strict conditions.
Expectations of the decision, leaked to media, sent Spanish borrowing costs tumbling in a 3.5-billion-euro ($4.4 billion) issue in the morning.
Confirmation of the news pushed Madrid share prices more than three percent higher in afternoon trade.
But neither leader chose to comment on ECB President Mario Draghi's decision.
"The ECB acts within its independence and within its mandate and is responsible for the stability of the currency, the value of the currency, and to take the appropriate decisions," Merkel said.
Many investors and analysts believe there is now no doubt that Spain, fresh from accepting a eurozone rescue loan for its banks of up to 100 billion euros, will formally ask for a sovereign bailout.
The country faces about 30 billion euros in debt repayments in October even as it struggles with steep borrowing costs.
But Madrid wants to avoid new conditions, having already announced plans to claw back 102 billion euros by 2014 with a series of austerity cuts and tax increases.
Rajoy brushed off a question about what he would do. "When I have news, I will let you know," he said, adding that he had not even had time to read Draghi's comments.
The Spanish leader claimed to have Germany's agreement that his country's borrowing costs, in particular the risk premium it pays over equivalent German debt, do not reflect the realities of his economy.
"Spain and Germany agree in the diagnosis: we have seen large differentials in the eurozone that mean the risk premiums do not reflect the economic fundamentals nor the efforts in fiscal consolidation and structural reforms we are carrying out," Rajoy said.
But Merkel was more circumspect.
"I am not competent to say by what percentage the interest rates are too high or too low. I can say that German interest rates are very low and that the interest rates of other countries are higher," Merkel said.
"And of course, apart from the competitiveness of the various countries there are also systemic questions that can play a role," the German leader said.
She gave clear support Spain's reform efforts, however.
"These reforms are not useful in themselves, rather they serve to restore competitiveness," Merkel said, adding that Germany had great respect for Spain's reform programme.
Spain posted blow-out budget deficit of 8.9 percent of gross domestic product last year, far exceeding the 6.0 percent target.
Now it is committed to lowering the deficit to 6.3 percent in 2012, 4.5 percent in 2013 and 2.8 percent in 2014.
But those targets will be difficult to meet in a time of recession, which tends to slash tax revenue and raise costs for items such as jobless benefits. Spains unemployment rate has surged to nearly 25 percent.