UPDATE 1-Monti says a Spain request for EU aid would calm markets

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MILAN, Oct 12 (Reuters) - Italian Prime Minister Mario Monti said on Friday that any request by Spain for European Central Bank (ECB) support to lower its borrowing costs would calm financial markets.

Spanish Prime Minister Mariano Rajoy, who has said he will only make a decision on the matter when he has all the details, is thought to be waiting for regional elections on Oct. 21 and may delay a decision further if bond yields remain manageable.

If Spain seeks aid, "There are two lines of thought," Monti told foreign reporters in Milan. "One says that speculators will, like a pack of wolves, move on other countries. But if the system is there and it works, I imagine that this would make market speculation less aggressive."

The ECB's plan to buy the bonds of struggling member states has raised hopes of an end to the most acute phase of the euro zone's crisis, but this has been undermined by Spain's delay in asking formally for such aid.

Italy, the euro zone's third-biggest economy, has a massive deficit, the slowest average growth rate in the European Union, is seen as the bloc's weakest link after Spain, and its yields often track just below those of its neighbour.

Monti's comments followed similar remarks from European figures including Swedish finance minister Anders Borg.

Spanish borrowing costs have fallen from levels above 7 percent that triggered bailouts for other euro zone states. The yield on Spain's 10-year bond was 5.65 percent on Friday, while Italy's was 4.98 percent.

(Reporting by Lisa Jucca and Paola Arosio; Writing by Steve Scherer; Editing by Louise Ireland)

((steve.scherer@thomsonreuters.com)(+3906 8522 4369))

Keywords: ITALY MONTI/