10.00 Back to Greece, where finance minister Yannis Stournaras has admitted that talks between Europe's debt inspectors and the country have been difficult. In a speech in Athens this morning, Mr Stournaras said that the Greek crisis had been caused by an inefficient state, but insisted that reforms since 2010 had been significant, with unit labour costs falling by 15pc. Meanwhile, state-run news agency ANA reported this morning that politicians were still struggling to find €4bn in spending cuts as part of an €11.5bn package that is needed to unlock its next bail-out tranche. 09.56 Nicolas Spiro at Spiro Sovereign Strategy comments on the auction: Sentiment towards Spain is beginning to deteriorate because of growing uncertainty about whether Madrid will request a bond-buying programme. Spanish debt auctions have an increasingly artificial feel to them as the markets, Spain and the ECB are all playing chicken with each other. Yet the fact remains that the Treasury managed to get all its debt out the door this morning, demand was solid, if unspectacular, and yields continued to fall. Although investors are starting to lose patience with Spain, they don't want to throw in the towel for fear of missing out on a possible bond-buying-driven rally. It's a bizarre standoff to say the least. However the window of opportunity for Spain to issue debt at what are still relatively favourable yields appears to be closing. The markets have priced in an ECB-backed bond-buying programme for Spain. The longer Madrid dithers, the more likely it is that the markets will turn decisively against Spain. 09.47 Despite yesterday's jitters, Spain has paid lower interest rates to get a short term debt auction away this morning. The country sold €3.56bn of 12-month debt at average yields of 2.835pc. This compares with 3.070pc at a previous auction in August. It also sold €1.02bn of 18-month debt at average rates of 3.072pc (v.3.335pc). Demand was steady, with two bidders for every bond on offer at the 12-month auction (v. 1.9). 09.45 Commenting on the inflation data, James Knightley at ING, said: The rise in oil prices and food commodities presents some risks for headline inflation in coming months, but with the weak economy implying only limited corporate pricing power we still expect inflation to fall back to 2 percent by the end of the year. This means that the Bank of England will have room to implement more quantitative easing at the November MPC, especially with sterling strength causing some concern over export competitiveness at a time when domestic demand remains weak. 09.36 The ONS said that the slight dip was mainly due to falling furniture and household services costs, which were partially offset by a rise in transport and fuel. The largest upward inflation pressures came from motor fuels and air transport, according to the ONS (Photo: PA). The broader Retail Price Index inflation measure, which includes mortgage interest payments, eased to 2.9pc in August, from 3.2pc in July. 09.33 UK inflation eased in August, official figures show. Consumer price inflation stood at 2.5pc last month, from 2.6pc in July, according to the Office for National Statistics. 09.25 Lots of Greek updates this morning. Charles Dallara, the outgoing head of the Institute of International Finance (IIF), has said that Greece should get cheaper rates and more time to repay its multi-billion euro bail-out - but only after Athens delivers on its reform commitments. He told a news conference in Beijing: Once that has been done, and I am confident it will be done, Europe and the IMF should move quickly to extend the adjustment period for at least two years and provide the modest additional financial support for that extension to be effective Only some 15-20 billion euros is needed. This can easily be realised in part by reducing interest rates on the loans which Europe and the IMF made to Greece on more concessional terms. 09.15 Spanish bad bank loans climbed to a fresh high in July, with almost 10pc of households and companies now behind on their payments. Bad debts climbed to 9.86pc of total lending, the according to Bank of Spain data, the highest since records began in 1962. The data showed that €169.3bn of loans were more than three months past their repayment deadlines. June's bad loan rate was also revised up, to 9.65pc. 09.01 With speculation swirling about whether Spain will ask for aid, the country's deputy prime minister, Soraya Saenz de Santamaria, said in a television interview this morning that Spain is still considering the conditions of a possible European Union bail-out. Europe must recognise the sacrifices and reforms Spain is carrying out, she added. 08.54 Spain's short-term bond auction comes amid persistent speculation that the country will ask for aid. Yesterday, the ECB governing council member Luc Coene said that rising bond yields may force Spain into asking for aid submitting to the ECB's conditions for granting it. He told a panel discussion in London that if "markets see that Spain will not" ask for assistance, "then it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality programme." 08.50 Rising borrowing costs will create unease as the country prepares to auction 12 and 18-month bonds this morning, testing investor appetite following Mario Draghi's move to backstop the euro with his proposal for an "unlimited" bond buying programme. 08.48 Spanish borrowing costs were on the rise again yesterday, writes Louise Armitstead: Spanish borrowing costs rose above 6pc again as a continued stand-off between Madrid and Brussels fuelled fears that the European Central Bank's bond buying programme pledge is not enough to stabilise the eurozone. The yield on Spain's benchmark 10-year bonds were pulled back just below 6pc at the close, but their steady rise all day reflected bets by traders that Madrid's determination to resist a bail-out will cause more volatility. Some argued that optimism that followed the unveiling of the so-called "Draghi Plan" to buy bonds was already wearing off. People march against cuts in Madrid but economists say more are needed