debtEU authorities are presumably, according to FT reporters Peter Spiegel and Miles Johnson, working behind closed doors on a an aid package to Spain as well as preparing for an open-ended bond purchases program by the ECB. Brussels is reportedly helping Madrid to tweak an economic reform plan thought to be announced next week, the FT reports.

From the FT: "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. The plan will focus on structural reforms to the Spanish economy."

Greece and Troika no reaching deal

Negotiations between Greek officials and the Troika inspectors continued on Thursday, but no agreement has been reached on the package of budget cuts amounting to 11.7 billion euros, required before the next tranche of the EU bailout can be released. Therefore, the Greek authorities plan to push for a two-year extension of the deadline to pay back the loans.

Greek Finance Minister Evangelos Venizelos informed in the European afternoon that the deadline for presenting the package of budget cuts, fixed for September 23, will be missed and the talks will continue next week.

Social disagreement towards the unpopular measures, which include reductions in wages, pensions and welfare benefits, has been rising in Greece and labor unions have been organizing various protests against them. They have also called a general strike for September 26.

Chinese PM Wen urges EU to lift arms embargo

Chinese Premier Wen Jiabao met with President of the European Council Herman Van Rompuy and President of the European Commission José Barroso in Brussels on Thursday as part of the 10th EU-Chinese summit.

PM Wen called for lifting the arms embargo on China, which the EU had imposed in 1989, following the military suppression of the demonstrations on Tiananmen Square. He also urged EU officials to lift all tariffs on Chinese products.

“I have to be very frank in saying this ... but the solution has been elusive over the past 10 years,” Wen said. “I deeply regret this and I hope the EU side will take greater initiative to solve these issues.”

Nevertheless, Premier Wen expressed his support for the EU in its fight against the debt crisis, assuring at the same time that the situation in China will stabilize as soon as the policy measures gain traction.

Spain auctions 4.8 billion euros of bonds at lower yields

During a debt auction, held by the Spanish Treasury in the European morning, the country sold 4.8 billion euros worth of government bonds, out of the targeted 4.5 billion. This is the most the country had auctioned since January. Borrowing costs fell in comparison with the previous sale.

The average yield on 10-year bonds was at 5.66% (versus 6.64% seen in August and the lowest since January). The average yield on 3-year bonds was at 3.85%, in comparison with the 3.68% seen at the previous auction.

Spain issued debt for the second time this week, as on Tuesday the country's treasury sold 4.6 billion euros in 12-month and 18-month bonds.