Spain defied the markets by averting a sovereign bailout this year but high interest rates could yet force Madrid to its knees as the nation confronts a 207-billion-euro ($274 billion) financing headache in 2013.
The eurozone's fourth-biggest economy has skirted a rescue so far even after slipping into a recession in mid-2011 that has sent the unemployment rate soaring to 25 percent, the highest in Spain's modern history.
Prime Minister Mariano Rajoy's government reached out in June for a eurozone rescue loan of up to 100 billion euros to fix the balance sheets of Spanish banks, crushed by bad loans since a 2008 property crash.
But even as investors fled Spain, sending its 10-year-bond yield above seven percent mid-year as they watched Madrid struggle to curb soaring public debt, Rajoy managed to swerve the politically costly option of pleading for international help.
European Central Bank chief Mario Draghi gave decisive support in September when he announced the bank's readiness to buy an unlimited sum of bonds to curb borrowing costs for member states that accept strict conditions.
The prospect of such intervention alone was enough to calm the selling of Spanish debt securities.
A grateful Rajoy says he can get by for now without even seeking the ECB's bond-buying intervention.
Spain's 10-year bond yields were trading below 5.3 percent in the past week.
In his final news conference of the year, the prime minister warned that Spain's economy faced a "very tough" year ahead.
"Today we are not thinking of asking the European Central Bank to intervene to buy bonds on the secondary market but that is a very useful instrument that is available to all countries of the Union," he added.
"If Spain and its government believe that it is necessary to use it, let there not be the least doubt that we will do so. But in principle today we are not thinking of doing it," the premier said Friday.
That could change, analysts say.
Spain's budget for 2013 anticipates that the Treasury will have to issue 207.2 billion euros in gross debt in 2013, almost all through bonds and bills, to cover debt repayments and new financing needs.
That compares to the 186.1 billion euros in gross debt that last year's budget previewed for 2012.
"The country is heading in the right direction in reducing its deficit. But in the end, it will all depend on the markets," said Rafael Pampillon, head of economic analysis at Madrid's IE Business School.
Concern over a shift in Italian economic policy with February 24-25 elections on the horizon, and doubts over Spain's ability to finance its debts or meet its deficit-cutting targets could yet push up Spanish borrowing costs, he said.
At one point in mid-summer, investors in Spanish 10-year bonds demanded a premium of 600 basis points in annual return over the safe-bet German equivalent. Since Monti's offer to intervene, that has fallen to around 400 points, still a significant extra cost.
Most economists now believe Spain can skirt a rescue at least in the immediate future.
A sovereign rescue is not impossible, said Edward Hugh, economist based near Barcelona in the northeastern region of Catalonia.
"But they will definitely put it off for as long as they can, and at the moment it seems that they can put if off for quite a long time," he added.
In the meantime Spain still faces steep financing costs, said Jesus Castillo, economist at French investment bank Natixis.
The Spanish 10-year bond yield affected not only the state's borrowing cost but also that of many households and businesses, Castillo said.
The risk premium charged on Spanish debt, even now, was "not viable over the long term", he warned.
"If the Spanish economy is being strangled today it is because a high interest rate is killing off investment plans as they are born," he said.
It is an argument that seems to plead for a bailout.
If the ECB could bring down interest rates, some say, it would breathe new life into the economy, which is expected to shrink 1.5 percent this year. Next year, the government tips a further 0.5-percent slump and most private forecasters are expecting a much sharper decline.
But Spaniards themselves seem to be divided over a bailout, even as they suffer an unprecedented programme of austerity measures designed to bring the public deficit under control.
A survey by Madrid pollster InvyMark for a Spanish television channel this month found 54.5 percent of those asked believed Rajoy should not ask for a sovereign bailout, against 31.5 percent who were in favour.
More than two-thirds -- 69.1 percent -- said they thought such aid from Europe would not be positive for hard-hit Spaniards.