Spain on Tuesday sold 2.8 billion euros
(3.7 billion dollars) of government bonds in its fourth successful
debt auction this year, easing the threat of needing a financial
rescue from the eurozone.
Three-month and six-month bonds had yields of 0.5 per cent and 0.9
per cent respectively, the lowest since March.
Spain was covering its financing needs without having sought a
rescue so far, Industry Minister Jose Manuel Soria said.
A rescue from the eurozone's bailout fund would include
bond-buying by the European Central Bank to lower Spain's borrowing
costs.
But EU Economy Commissioner Olli Rehn had said in November that he
thought Spain had done enough in fixing its economy to avoid
sanctions in 2012 and 2013, despite its deficit exceeding EU targets.
Spain could not yet say that its economy was recovering, but "the
country is in a better situation than in the beginning of
2012," Soria said.
Spain's economy is expected to shrink at a rate of more than 1 per
cent this year, while a quarter of the workforce is unemployed.
The European Commission meanwhile said that Spain was likely to
fall short of its deficit target for 2012, raising the prospect of a
further revision of the target.
"Fiscal consolidation advanced in the third quarter, but the 2012
deficit target will likely be missed," the European Union's executive
said in a new report on Spain's compliance with its bank bailout.
"Even if the full effect of some of the consolidation measures
kicks in only in the fourth quarter - VAT increases, corporate income
tax hikes and the elimination of the Christmas bonus among public
employees - meeting the full-year target of 6.3 per cent will be very
difficult," it added.
EU member states are all mandated to eventually bring their
deficits below 3 per cent of gross domestic product (GDP), with
sanctions at the disposal of the EU if they don't comply.
But Madrid has been granted reprieves before in the form of softer
deficit targets and an extra year to hit the 3-per-cent goal, given
its struggle with a recession and a banking crisis.
Rehn has said that the commission will consider "any possible
further steps" in February. He has also insisted that hitting targets
is not the only priority, with the sustainability of Spain's public
finances also key.
The new report otherwise found that Madrid is "broadly on track"
with the conditions tied to its bank bailout, while also noting that
"preserving financial stability and finalizing the restructuring of
the banking sector" are key challenges.
"Risks to Spain's financial sector remain significant, despite the
overall good performance," it said.
