Prime Minister Jose Luis Rodriguez Zapatero said on Tuesday that Spain had beaten its deficit-cutting target for 2010 and would meet this year's goal too, addressing a deep concern on markets. Investors are demanding ever higher interest rates for buying Spanish debt because of concerns about the size of Spain's annual deficits and the country's heavy exposure to bond markets.
The big fear is that if debt market rates go too high, Spain could be forced to seek an international rescue - a crisis with global implications that would dwarf the Irish and Greek bailouts. Seeking to calm those fears, Zapatero's Socialist government has promised to lower the public deficit from 11.1 percent of output in 2009 to 9.3 percent in 2010, and 6.0 percent in 2011. The prime minister said he was convinced that Spain's semi-autonomous regions, which have racked up large deficits, would comply with their goals for the year ahead.