that they could be penalized if investors conclude they were
wavering in efforts to cut spending and improve economic
Financial markets "are asking these governments to deliver," he said.
In early March, Mr. Rajoy defied his European counterparts by softening the country's deficit target. Since then, Spain's long- term borrowing costs have remained above those of Italy, the other large and troubled economy in the euro zone. As he presented the government's plan to reduce its annual budget deficit, Mr. Rajoy also disclosed that the total national debt would rise to 80 percent of gross domestic product this year, from 68.5 percent in 2011.
To help alleviate investors' concerns, Mr. Rajoy is now counting on a EUR 27.3 billion squeeze in the central government's budget for this year. His 2012 budget, introduced last Friday, calls for government ministries to cut spending 17 percent, on average. Mr. Rajoy, who took office only three months ago, is also relying on an amnesty program intended to increase tax revenue by bringing to the surface part of the income generated by Spain's underground economy. That decision, however, has generated opposition from some regional governments, including that of the Basque Country, which want Madrid to take more forceful measures to track down tax cheats.
In another sign of the euro zone's continuing fiscal troubles, the Greek track and field federation announced Wednesday that it was suspending all domestic competitions indefinitely as a protest against cuts to state financing. While the action will not affect international events, including Greece's participation in the Summer Olympics in London, it brings to a halt domestic contests planned across Greece, including marathons in several cities.
It was the second time that the Hellenic Track and Field Federation has suspended operations in recent months. In November, the group suspended its operations for two weeks, but there were few events scheduled at the time. The federation said this suspension was indefinite, but added it would review its decision "depending on developments."
The head of the group, Vassilis Sevastis, said budget cuts meant that the organization had not been able to pay coaches and suppliers for up to 10 months. In a statement, the federation called on Culture Minister Pavlos Geroulanos "to intervene and avert the financial deadlock and the demolition of the backbone of classic athletics."
Tensions in European financial markets have cooled in recent months after the E.C.B. issued EUR 1 trillion in cheap, three-year loans to banks. Mr. Draghi said the loans provided "a window of opportunity for governments to undertake structural reforms."
But Jorg Kramer, chief economist at Commerzbank, said the money could have the opposite effect, taking the heat off the leaders of countries like Italy to undertake measures that would initially be unpopular, like reducing job protections, but ultimately improve growth.
"The success of the three-year tenders took pressure off the peripheral countries to implement the necessary reforms," Mr. Kramer wrote in a note to clients Wednesday. "But without such reforms the sovereign debt crisis will not be solved and the E.C.B. will be forced to continue to de facto finance peripheral countries by printing money."
In what may have been an attempt to assuage German fears about inflation, Mr. Draghi made a point of emphasizing that the E.C.B. would keep a close eye out for signs that higher energy prices were translating into higher overall prices.
Mr. Draghi may also have been reacting to an agreement last week between Germany and the union representing two million public sector workers that gives them a 6.3 percent wage increase.
Jens Weidmann, president of the Bundesbank, the German central bank, has been particularly vocal about the need to make sure that measures to prevent a deeper banking crisis do not create an inflationary backlash.
But Mr. Draghi gave no indication the E.C.B. was likely to tighten monetary policy soon. Mr. Draghi said it would be "premature" for the bank to begin rolling back the special support it had been providing to banks.
"The E.C.B. still seems to be prepared to keep its exceptional monetary policy measures in place for quite some time," Peter Vanden Houte, an economist at Dutch bank ING, wrote. "The difficult part will be to keep the Germans in the governing council happy and at the same time putting pressure on peripheral governments not to come back on their promise of fiscal consolidation."
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