Image caption Mr Rajoy insisted he had not discussed making a formal bailout request with Italy's Mario Monti

Spain's implied cost of borrowing fell below 7% on Friday as Prime Minister Mariano Rajoy said he was considering bailout options.

At a press conference in Madrid, Mr Rajoy said he would do "what was best for the Spanish people".

The yield on Spain's 10-year bonds dropped to 6.8% late on Friday after topping 7.4% earlier in the day.

Greece, Portugal and Ireland all had to seek international bailouts when their borrowing costs stayed above 7%.

In June, Spain requested 100bn euros ($122bn) of loans from the EFSF bailout fund to help support its banks, which are struggling with bad debts from loans made in the property sector.

Analysis Any journalist working in Spain will have lost count of the number of times the Spanish government has ruled out a full bailout for the country. Now the language has changed. However by stating that he was waiting to see what measures the European Central Bank might take, Mariano Rajoy might be hoping to exert some pressure on officials in Frankfurt, Brussels and Berlin. The fact that the amount needed to bail out Spain would probably be hundreds of billions of euros, and also that there's no guarantee that Italy might not later have to follow the same path, means that it's possible that a full bailout for Spain might not be the preferred option for other countries and institutions in the eurozone. The change in tone from the Spanish government reflects the disappointment here over what Spain's El Pais newspaper described as the ECB's "inaction" on Thursday. Mariano Rajoy has raised the stakes for the whole eurozone, stating that once the ECB has decided what course of action it will take to help Spain lower its borrowing costs, he will also make a decision of his own.

However, speculation had increased in recent weeks that the government would have to request a full financial rescue.

Draghi's challenge

On Thursday, the president of the European Central Bank (ECB) Mario Draghi said the ECB was ready to intervene in the bond markets to bring down the cost of borrowing for countries such as Spain.

But he told reporters that Spain's formal request for help from the European bailout funds - the EFSF and ESM- was "a necessary condition" of any ECB support.

Eurozone members Germany and Finland oppose ECB support for Spain without promises from its government to stick to strict spending and budget plans.

By making a formal request to the EFSF, Spain would have to sign a memorandum of understanding or legal promise to stick to agreed plans.

"What I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision," he said.

The government was also due to submit budget plans for 2013 and 2014 to the European Commission on Friday.

Last month, Madrid announced additional spending cuts and tax rises worth 65bn euros ($79bn; £51bn).