PM says Spain ready to 'accelerate' economic reforms

27th November 2010, Comments 0 comments

Spanish Prime Minister Jose Luis Rodriguez Zapatero on Saturday said the government was ready to "accelerate" economic reforms if necessary, following a week of deep concerns on the financial markets.

Zapatero added that he would not "deviate from austerity", a day after he ruled out an Irish-style rescue for Spain and markets cranked the country's debt risk premium up to record highs.

"If it is necessary to accelerate the reforms we will do it," he told reporters following a meeting with business leaders.

The government's economic policy, he said, was based on austerity, restructuring of the financial system and structural reforms.

He said the government intended to pursue the structural reforms "as quickly as possible" in order to be "more productive and increase competitiveness."

The prospect of a costly rescue for Spain's economy, which is twice the size of that of Ireland, Greece and Portugal combined, has prompted widespread concern.

Investors are demanding increasingly high rates in return for taking the risk of buying Spanish debt, adding to the problems faced by Madrid in raising fresh cash.

"Those who make short term bets against Spain will be making a mistake," Zapatero said on Friday, adding that there was "no scenario" under which a rescue of Spain could be envisioned.

"I am not delivering a message of confidence just because I want to but because of concrete facts."

The gap between safe-bet German 10-year bonds and comparable Spanish bonds leapt to a record 2.64 percentage points on Friday before easing somewhat, repeating the pattern seen in Greece and Ireland just before they capitulated and turned to the EU and the IMF for rescue.

A few months ago the gap was 1.70 percentage points.

Zapatero's comments came as 50,000 people in Ireland took to the streets Saturday to oppose savage cutbacks needed to secure an international bailout.

The crowds waved placards "Eire not for sale, not to the IMF" as the rally made its way through Dublin in a mass protest against the austerity package announced Wednesday by Prime Minister Brian Cowen.

The four-year package will cut the minimum wage and slash 25,000 public sector jobs as the one time "Celtic Tiger" economy tries to pay off a huge budget deficit.

Cowen's government say the measures, along with a budget due on December 7, are a precondition to securing European Union and International Monetary Fund loans worth a reported 85 billion euros (113 billion dollars).

Spain's economy was hard hit by a massive property bubble and the global economic crisis in 2008 and 2009, and it now suffers from an unemployment rate of about 20 percent, along with zero economic growth in the third quarter.

© 2010 AFP

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