BY DAVID ROMÁN

MADRID—Spain's prime minister Wednesday urged European leaders to agree at this week's summit on "urgent" mechanisms to allow fragile economies to refinance debt, issuing a stark warning that his country wouldn't be able to sustain steep borrowing costs for much longer.

The latest plea from Prime Minister Mariano Rajoy came as the country's central bank said that the euro zone's fourth-largest economy is falling deeper into recession and while the country's sovereign borrowing costs stubbornly remain at near record-high levels.

"We can't finance at current prices for too long," Mr. Rajoy told legislators in parliament. "There are many institutions and ...