MADRID - Spain is not negotiating for a full-blown European Union bailout, Spanish Prime Minister Mariano Rajoy said in Madrid on Tuesday.

Spain's Prime Minister Mariano Rajoy (R) and European Council President Herman Van Rompuy talk at the start of their meeting at Moncloa Palace in Madrid Aug 28, 2012. [Photo/Agencies]

Rajoy made the comment after holding talks with visiting European Council President Herman Van Rompuy.

"I have assured Van Rompuy Spain will continue to carry out (reform) measures," Rajoy said in a press conference after the talks, adding Spain's current economic situation required closer economic and financial links within the EU and the eurozone.

"Spain presented a proposal for a banking union and now we have to take further steps. It is important to have a banking union by December and for us to be able to recapitalize banks directly," Rajoy stated.

Van Rompuy, who interrupted a family holiday in Spain to come to Madrid, said the EU and its member states had "a duty to resolve" the imbalances in the economy together.

"The current situation has forced us to see some errors in the design of the eurozone," Van Rompuy added.

He said "there should be no doubt the euro is irreversible," adding that "the future of Greece is also in the eurozone".

"... But we can only leave the crisis behind through firm measures in each individual country," he said.

Van Rumpuy's visit will be followed by that of French President Francois Hollande on Thursday. German Chancellor Angela Merkel will also come to Madrid on Sept 6.

On Friday, Spain is expected to approve the creation of a public bank in Spain to take on the toxic assets of the country's banking system caused by the collapse of its housing sector.