The European Central Bank deputy president Vitor Constancio said this evening that financial markets have "overreacted" with regard to Spain.
Yields on Spain's 10-year bonds dipped below 6% ahead of a longer-term Spanish government debt auction on Thursday.
Spain's economy tipped into recession in the first quarter of 2012, Bank of Spain governor Miguel Fernandez Ordonez said today.
The central bank chief said Spain's economic contraction in the final quarter of 2011, when output fell 0.3%, continued into the first months of 2012.
The ECB deputy president, Vitor Constancio, in his remarks, said that he hoped that all the clarifications and decisions taken by the government will change market perceptions."
"We trust that the commitments that have been approved will be fulfilled and the targets will be achieved. It's now a matter, we think, of time that these will really work out," he said, referring to Spanish government measures to tackle the crisis.
Spanish debt yields have jumped recently on concerns about the nation's fiscal stability in the latest flare-up of the euro zone debt crisis.
There was still unease, however, about whether the market strength would last, with a focus on Spain's auction on Thursday. Spain is seen as the potential new source of contagion in the euro zone debt crisis.
Fourteen of Spain's struggling regions have submitted unpaid bills worth €17 billion to the central government which will help them pay off suppliers, the budget ministry said this evening.
The government has said it would help the 17 regions which enjoy a large degree of autonomy but whose debt has mounted sharply since the Spanish economy was rocked by the collapse of the property market and the global financial crisis in 2008.
Press reports say the 17 regions combined owe some €30 billion to their various suppliers as they have struggled to pay their way and now face more problems as the economy slips back into recession.
The 14 regions -- excluding Galicia, Navarre and the Basque country -- submitted some 3.9 million bills worth €17.25 billion.
In return, the budget ministry said they had until the end of April to submit spending cuts to the government which is trying to put the national finances in order amid fears Spain could be forced into seeking a bailout like Greece, Ireland and neighbouring Portugal.
