Spanish prime minister Zapatero defends his country’s harsh austerity package

Spain’s premier vows to press on with austerity

MADRID — The Bank of Spain said Wednesday that borrowing by Spanish banks from the European Central Bank last month broke records.

On its website the bank said Spanish banks sought €126.3 billion ($160.4 billion) in funding from the ECB in June, up an unprecedented 48 percent from €85.62 billion ($108.7 billion) in May.

Spanish banks have been obliged to go to the European Central bank for credit because they have been facing difficulties in raising money on international markets due to fears over their solvency.

The Spanish government insists its financial institutions are healthy and has said this will be demonstrated when the results of stress test are made public before the end of the month.

The country recently introduced austerity measures, labor and savings bank reforms in a desperate bid to get Spain out of a near two-year recession.

Speaking at an annual State of the Nation debate in Parliament on Wednesday, Prime Minister Jose Luis Rodriguez Zapatero said his government would press on with harsh austerity cuts and labor reform policies aimed at slashing the country’s budget deficit.

Zapatero said it had been “a difficult, black year” but added the government would not deviate from implementing measures including cutting civil service pay five percent. He also said Spain should adopt retirement at 67, extending working lives by two years in keeping with some other European countries.

The prime minister said his government acknowledged the deficit was high and had to be reduced rapidly, but he added that the stimulus measures originally put in place had saved 800,000 jobs in Spain as the recession began to bite.

The prime minister also defended constitutional reforms aimed at granting northeastern Catalonia greater regional autonomy, insisting it would not splinter Spain as the opposition claims.

Spain’s Constitutional Court last week dealt a blow to Catalonia when it ruled the region could not legally call itself “a nation” within Spain, triggering a protest march by more than one million people in Barcelona, the regional capital.

However, it did approve the majority of a new regional charter granting Catalonia new autonomy powers against Popular Party claims that this undermines Spain as a unified state.

In the first quarter of this year Spain limped out of nearly two years of recession with unemployment at over 20 percent, the highest in the 16-nation eurozone.

Zapatero said activity indicators including social security payments, industrial production and activity at customs entry points pointed to a second consecutive quarter of growth. He did not specify what this customs activity involved.

“The best service you could do for Spain is to call elections,” said Mariano Rajoy, leader of the conservative opposition.

Associated Press writer Ciaran Giles in Madrid contributed to this report.

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