Rajoy Comments Spark New Spain Bailout Confusion

Spain's Prime Minister Mariano Rajoy has denied his embattled country will request a bailout this weekend, according to a media report on Tuesday, further confounding investors who are struggling to make sense of a raft of contradictory messages about when the country will formally seek aid.

Spanish Prime Minister Mariano Rajoy (R) holds talks with EU Economic and Monetary Affairs Commissioner Olli Rehn at the Moncloa palace on October 1, 2012 in Madrid.

Analysts and economists agree that October is shaping up as the month when the country finally requests a bailout from international lenders.

But Rajoy reportedly denied he would request a bailout as soon as this weekend in a meeting with other high-ranking People's Party officials on Monday night, according to Europa Press.

Reuters reported earlier on Monday that Spain was ready to request the bailout by next weekend, but added that Germany wanted the country to hold off for the time being.

The debate in the markets seems to have moved inexorably on from whether Spain will ask for a bailout to when it will happen. It was only two months ago that , the chairman of Goldman Sachs Asset Management and one of the world’s most listened-to economists, pointed out that Spain may not need a full bailout.

Since then, events in Spain itself and the euro zone seem to have spurred the timeline on, and several well-respected analysts and economists are now forecasting that the formal request will come this month. A bailout is now “the only missing piece of the jigsaw,” Lloyds analysts said on Tuesday.

Spain has already announced an austerity-focused budget, unveiled an audit of its banks and said that it will request aid for these banks from the European Central Bank (ECB). (Read More: For How Long Will Spanish Banking Audit Bring Relief?)

“It might be a quite precarious game if Germany indeed wants to wait until all stars align perfectly. We would suggest that for the market, the earlier uncertainties are removed, the better,” analysts at RBC wrote in a research note.

Economists at HSBC are among those arguing that October will be the month Spain concedes it needs a bailout — which would mean that it could be eligible for the ECB’s bond-buying program known as Outright Monetary Transactions (OMTs). (Read More:Is ECB Bond-Buying The Work of the Devil?)

“While expectations of a soft bailout for Spain helped calm market sentiment, the real side of the economy continues to deteriorate,” they wrote in a research note. “This only means that there is more pain to come next year.”

Nicholas Spiro, managing director at Spiro Sovereign Strategy said that the Spanish government is chasing “a constantly moving target” as its attempts to reform the economy domestically are being dragged down by external factors.

“German foot-dragging over plans for a banking union, and its insistence that ‘legacy assets’ be excluded from related proposals to recapitalize banks directly using money from the ESM, is further poisoning the politics of any sovereign bailout,” he argued.

“Spanish politicians could be forgiven for thinking: ‘With friends like these, we don't need enemies’.”

There are several key meetings in October where Spain’s troubles are on the agenda, that might herald the final announcement of a bailout. These include the finance ministers’ meeting of Oct. 8, and, what market sources tell CNBC is more likely, the European Union summit of Oct. 18-19.

“Whether or not Spain asks this week or the week after, or the week after, what matters is that the market does anticipate that it will come,” Jane Foley, senior currency strategist at Rabobank, told CNBC.

The economy is already feeling plenty of pain, as Tuesday’s , which showed that 53 percent of Spain’s young people are unemployed, demonstrated. While official figures do not reflect off-the-books work, which has often been cited as a problem in Spain, this still paints a picture of rising dependency on government handouts.

In 2013, Spain’s economy is facing a double whammy of cuts to government spending via austerity plans and a downturn in the world trade cycle which may dampen the exports which have been a rare ray of sunshine for the Spanish economy this year, according to HSBC.

—By CNBC’s Catherine Boyle; Follow Her on Twitter @cboylecnbc