Spain made its most explicit suggestion yet that it would seek help from Europe for its struggling banks, as the country's budget minister said high interest rates on Spanish bonds were a signal the government risks losing access to financial markets.

Euro-zone officials worked privately to develop an approach to deal with Spain's intensifying financial troubles ahead of a European Union summit in Brussels at the end of the month, according to people familiar with the effort. The talks came as European officials have stepped up efforts to develop a road map for a possible tighter economic union within the common currency area, a goal that is still largely theoretical and distant.

Some leaders of the Group of Seven leading industrialized nations, meanwhile, pressed European leaders to act more aggressively to tame their debt troubles and contain Spain's problems.

The crisis in Spain, the euro zone's fourth-largest economy, is seen in financial markets as the acid test for the survival of the European common currency. Spain's troubles—unlike those of Greece, whose economy is one-fifth the size—can't be blamed on reckless government spending, but instead on a bursting real-estate bubble. The country is also widely considered too big to bail out, presenting Germany, which holds the euro-zone's purse strings, with a gigantic headache.

Spain's borrowing costs have been above 6% for more than three weeks, levels widely considered unsustainable over time. Investors have retreated from the bond market amid fears that Madrid will have to make good on some of the huge losses that the country's banks are expected to suffer on their property-loan portfolios—at a time when its budget is already under pressure from a shrinking economy and rising unemployment.

Budget Minister Cristóbal Montoro said rising government bond yields showed that Spain had problems accessing bond markets.

"What that premium says is that Spain doesn't have the market's door open," he said. "The challenge is to open that door and regain the confidence of those markets, our creditors."

Other Spanish officials have said it is more precise to say foreign buyers of Spanish bonds had completely disappeared from the market.

The next test will come Thursday, when Spain hopes to sell up to €2 billion ($2.5 billion) in a critical but relatively small auction. On Tuesday, yields on Spanish 10-year bonds slipped slightly at the close in Europe to 6.31% from 6.40% the previous day and 6.69% last week. By comparison, the yield on the German 10-year bond, considered a haven for investors, was at 1.20%.

Europe should move swiftly to allow its institutions to directly boost the capital of troubled banks in Spain, Mr. Montoro said. The sums needed to recapitalize Spain's banks wouldn't be "astronomical," Mr. Montoro said, adding that any wider rescue plan would be unfeasible and unnecessary.

"The amount needed by Spain's banking system isn't very high, nor excessive. What matters is the procedure to provide such an amount—and that's why it is important that European institutions open up and proceed with this," Mr. Montoro said in a radio interview.

Officials in several capitals said they are working toward an approach that would allow Spain to access funds to rebuild the capital of problem banks, preferably through direct injections from the euro-zone's bailout funds.

Lending directly to banks would be a departure that would require the approval of all euro-zone governments, and possibly changes to European treaties. Germany has so far argued that European rescue funds shouldn't be lent directly to banks. Officials in Berlin argue that such a move would weaken Europe's leverage over governments to put their finances in order.

But the officials familiar with the discussions described lending to banks as one way in which Spain could access common euro-zone funds without losing access to market finance. That appears to be an acknowledgment that Spain, whose government funding requirements could overwhelm existing bailout funds, can't lose access to market finance in the way that Greece, Portugal and Ireland did around the time of their bailouts over the last two years.

"Spain can't really be bailed out, from a technical point of view," Mr. Montoro said.

Analysts point to technical and political obstacles to the bailout funds directly providing capital to banks.

"Not only do certain governments not want to lose their ability to impose conditions on the sovereign, but the implicit burden-sharing involved in such a scheme would run into difficulties in Germany," said Mujtaba Rahman, analyst with the Eurasia Group.

Some analysts have put estimates for Spain's banking-sector needs to as high as €90 billion. Mr. Montoro's characterization of Spanish banks' needs came after Emilio Botín, chairman of Banco Santander SA, said Monday that €40 billion should be enough to make Spain's financial sector viable.

The likely level of Spain's bank capital requirements should become clearer in the coming week, with the International Monetary Fund's publication of a report into the country's financial sector. Independent advisers to the Spanish government are expected to provide a more detailed assessment of banks' needs over the summer.

Speaking later Tuesday in Parliament, Spain's Prime Minister Mariano Rajoy said the EU needs to quell doubts on the euro project by reinforcing integration and creating a banking union and common euro-zone bonds. Mr. Rajoy said Spain plans to continue an ambitious reform drive, but EU partners must do their part to improve the situation.

Mr. Rajoy's statements reflect the discussions now ongoing among governments over the conditions that the stronger and weaker economies in the bloc will accept to bind their economies closer together. For the first time over the past week, Germany has agreed to discuss what it believes are the steps necessary—including ceding more sovereignty to European institutions and to other governments—to make this happen. Nonetheless, German officials appear to see this goal as a long way off.

G-7 financial chiefs said Tuesday they expected euro zone leaders to bolster their banking system in the coming weeks. The assessment came after a teleconference in which some officials from the group urged European leaders to act boldly to fix a crisis that threatens to send the region into a severe recession, hurting other economies around the world. Officials from Spain, which isn't in the G-7, participated in the call.

A U.S. Treasury official said the talks included "progress toward financial and fiscal union in Europe."

Some European officials and analysts are skeptical that agreed steps toward an eventual economic union—or a credible plan to bolster bank capital in Spain—will do much to change market sentiment. Shifting that will depend on a much more explicit signal from Germany or the European Central Bank that Spain will be kept in the euro zone at all costs, they said.

Mr. Montoro's comments come after German Chancellor Angela Merkel suggested Monday that EU leaders consider putting the largest banks in the 27-nation bloc under direct European supervision, opening the door to more centralized oversight of the region's financial sector.

But in a sign that finding agreement on that will be tough and may not be quick, a senior ally of Ms. Merkel on Tuesday rejected calls to allow euro-zone bailout funds to bypass governments and inject capital directly into ailing banks.

Volker Kauder, the chief whip for Ms. Merkel's Christian Democrats in the German parliament, said Europe created the funds to come to the aid of countries that need to support their banks, urging Madrid to decide quickly if it needs to tap these funds.

The Wall Street Journal