Prime Minister Mariano Rajoy of Spain on Friday submitted his budget plans to the European Commission and said he was considering bailout options.
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 100 billion euros from the EFSF bailout fund to help support its banks, which are struggling with bad debts from loans made in the property sector.
However, the BBC reports speculation has increased in recent weeks that the government would have to request a full financial rescue.
Last month, Madrid announced additional spending cuts and tax rises worth 65 billion euros ($US79 billion).
