Spain is ‘dam’ that is protecting eurozone: government

Spain has gone from being “another domino” to “an insurmountable dam that it protecting the eurozone” due to its tough economic reforms, the government said Friday.

“Everyone says that Spain has carried out the reforms that it had to do, and it’s that which makes the situation (in Spain) different” from that in Portugal, Deputy Prime Minister Alfredo Perez Rubalcaba.

“We have gone from being another domino to being a dam, an insurmountable dam, which is protecting the eurozone, and this has been the result of the reforms that we have undertaken,” he told a news conference following a cabinet meeting.

His comments came as EU finance ministers meeting in Hungary thrashed out a multi-billion-dollar debt rescue for Portugal, demanding tough conditions as they try to draw a line under a destabilising debt crisis.

Portugal’s bailout, after Greece and Ireland last year, comes at a crunch time as the European Union faces fraught negotiations on setting up a controversial permanent rescue mechanism for wayward eurozone members.

The pressures on Portugal had raised doubts about other weak eurozone members including Spain, the eurozone’s fourth largest economy.

Any such bailout would be bigger than those of Greece, Ireland and Portugal combined, possibly threatening the whole eurozone project.

But Madrid, which has enacted stringent budget cuts, and labour, pension and banking reforms so as regain market confidence, is determined not to be the next eurozone domino to topple.

It is striving to distance itself from the debt woes of its neighbour and close economic partner.

“Portugal is a very painful issue for Spain and a country with which we are extremely supportive,” Rubalcaba said.

But he insisted that “things have changed in Spain in recent months.”