Spain does not need a bail-out or outside financial help to recapitalise its banks, the European Commission said today.
This is despite surging borrowing costs which are fuelling fears Madrid may need help.
Spain has unveiled a tough austerity budget to fight off euro zone debt contagion, but the rate demanded by investors to lend to Madrid surged to the worrisome 6% level earlier today before retreating to 5.9%.
When asked if the commission still stands by its assessment that Spain does not need a bail-out to recapitalise struggling banks, spokesman Olivier Bailly told a news briefing: "Yes we do."
The European Union's executive arm again applauded the Spanish government's efforts to reduce its public deficit and debt, including a "very substantial" reform of the labour market.
The measures are "very demanding and difficult" but necessary, Bailly said, adding that Brussels is waiting for the budgets of Spain's autonomous regions by the end of April to fully assess the country's efforts.
Spain has vowed to cut its public deficit - the shortfall between revenue and spending - to 5.3% of GDP in 2012 and 3% in 2013 after allowing it to run over target to 8.5% last year.
After Greece, Ireland and Portugal received bail-outs, analysts have warned that Spain could be next in line as it battles to overcome the crisis amid a recession and the euro zone's highest unemployment rate.
Fears over Spain's finances 'excessive'
French Budget Minister Valerie Pecresse said market fears over Spain's finances were "excessive" and that Madrid was pursuing the proper reforms.
Pecresse, who is also the government spokeswoman, said "we believe the fears being expressed today about Spain's economic health are excessive.
Markets are showing fresh concern about the sustainability of Spain's sovereign debt which is rising fast because of swollen budget deficits.
French Budget Minister Valerie Pecresse said market fears over Spain's finances were "excessive" and that Madrid was pursuing the proper reforms.
Pecresse, who is also the government spokeswoman, said "we believe the fears being expressed today about Spain's economic health are excessive.
Markets are showing fresh concern about the sustainability of Spain's sovereign debt which is rising fast because of swollen budget deficits.French Budget Minister Valerie Pecresse said market fears over Spain's finances were "excessive" and that Madrid was pursuing the proper reforms.
Pecresse, who is also the government spokeswoman, said "we believe the fears being expressed today about Spain's economic health are excessive.
Markets are showing fresh concern about the sustainability of Spain's sovereign debt which is rising fast because of swollen budget deficits.
"We think Spanish Prime Minister Mariano Rajoy's government is carrying out a courageous and necessary structural reform project, which is of a nature to improve Spain's growth potential and lead to a turnaround," Minister Valerie Pecresse said.
"It is clear that the worries being expressed come mainly from the fact that Spain, which was supposed last year to cut its deficit to 6% of GDP, could not," she said.
"This shows, if there were any need, and gives yet more proof of to the French people, the importance of meeting one's commitments on reducing deficits," she said.
Spain has vowed to cut its public deficit - the shortfall of revenue and spending - to 5.3% of GDP in 2012 and 3% in 2013 after allowing it to run over target to 8.5% last year.
Germany 'regrets' Spain's reforms not rewarded by markets
Germany's finance ministry also said today it regretted that Spain's austerity reforms had not yet paid off on financial markets where the country's borrowing costs have spiked higher.
"We regret that the markets are so far not yet fairly rewarding these enormous reform efforts," a finance ministry spokesman told a regular government news conference. "These reforms must first take effect," he said.
Spain's borrowing costs remained below the levels seen in November, he pointed out, adding that Spain was fundamentally better placed than many other industrial non-euro zone countries.
"We welcome that the Spanish government, against the background of the recent rate increases, has again confirmed its determination to reach the agreed goals for consolidation," the spokesman added.
