Spain said it would sell off more state assets and axe a jobless benefit, stepping up efforts to slash costs and persuade markets it will not need a bailout as its prime minister pulled out of a summit in Latin America. News of the cuts was well received in Brussels, which risks facing an insurmountable bill if Spain and other large economies apply for EU funds.
Premiums on Spanish bonds fell along with spreads on other eurozone peripheral debt, having received a hammering since Ireland agreed on outside help on Sunday. Jose Luis Zapatero said he was ending a payment for the long-term unemployed worth 426 euros a month, a year after it was introduced for claimants whose benefit had run out.
He said Madrid would sell 30 percent of its state lottery, let private companies take 49 percent stakes in airports and airport services, and move to support small and medium-sized firms. A government spokesman said Zapatero had also cancelled a trip to Argentina to focus on his country's economic problems, highlighted on Wednesday by weak manufacturing data.
Spain's efforts to rein in its budget deficit are under the microscope as financial markets drive up its debt servicing costs, fuelled by stagnant growth and its struggle to find a new economic model after a property collapse. Madrid has argued an initial raft of austerity measures, including civil servant pay cuts, tax hikes and frozen welfare payments, and a tight 2011 budget went far enough to rein in the public deficit, but also said it would do more if necessary. The Treasury will issue between 1.75 billion and 2.75 billion euros in 3-year bonds at a 2.5 percent coupon on Thursday in what is considered a key test for the country's ability to raise funds in the open market.