Investors reacted warily Tuesday to comments by Spain's prime minister that he won't accept certain conditions in return for a European Central Bank proposal to buy Spanish government bonds.

In his first televised interview since being elected last November, Mariano Rajoy warned Monday night that there are "certain red lines" he won't cross if Spain asks the eurozone's bailout funds for help, which would trigger the bond buying under strict conditions.

He didn't name the conditions, but said separately in the interview that he does not want to cut Spanish pension benefits because retired Spaniards with no way to supplement their monthly state payments would be hit harder than the rest of the country's population.

Analysts warned Tuesday that a drop in Spain's borrowing rate since the ECB program was announced last week might reverse if Rajoy resists pressure to accept conditions that may be imposed in return for the bond buying.

"Given that Spanish borrowing costs have fallen substantially since the ECB announcement last week it would appear that Spain feels less pressure to acquiesce than it did this time last week, thus creating further potential for disappointment as politicians contrive to grab defeat from the jaws of victory," said Michael Hewson, senior market analyst at CMC Markets.

The yield on the Spain's benchmark ten-year bonds rose slightly Tuesday morning but fell 0.01 percentage points in late afternoon trading to 5.66 percent. The yield is markedly lower than when ECB announced its plan.

Rates of 7 percent or more are considered unsustainable, and prompted Greece, Ireland and Portugal to ask for bailouts of their public finances. Spain has accepted a bailout of up to €100 billion ($128 billion) to save its banking system, which was hit hard by a property boom gone bust. The country wants to avoid a full-blown bailout though.

Rajoy met Tuesday in Madrid with Finland's prime minister, Jyrki Katainen, who said he wants the eurozone to avoid more bailouts and that Spain deserved credit for economically painful austerity measures pushed through by Rajoy this year that have raised taxes and cut government spending.

"I stressed that markets have not treated Spain fairly because the Spanish have applied plausible economic reforms and patched up their budget deficit," Katainen told reporters. "Spanish interest rates on loans should be at a lower level and that's why we must find joint solutions to calm jittery markets."

The bond buying program for Spain could be different than the financial rescues for Greece, Ireland and Portugal that meant lending them enough money so they didn't have to go to international debt markets charging unaffordable interest rates to pay off maturing bonds.

The ECB plan involves potential purchases of unlimited amounts of a country's short-term government bonds, a step that would lower their borrowing costs. That would drive up bond prices and push down their interest rate, or yield, and governments could take advantage of those lower costs the next time they borrow.

However, countries wanting central bank help must first ask 17 countries that use the euro for an assistance program from the eurozone's existing bailout funds. The funds would have to join the ECB effort by buying bonds directly from those governments.

And they must submit their economic and budget policies to scrutiny by the International Monetary Fund, something Spain wants to avoid.

Only then will the ECB step in — if it's satisfied the requirements are tough enough — and buy bonds with remaining maturities of one to three years on the open market.

Spain is in a deep recession with unemployment of nearly 25 percent, the highest in the eurozone.


Matti Huuhtanen contributed from Helsinki.