Zapatero says ready for tough austerity measures

Spain will implement its tough austerity package "whatever the cost" Prime Minister Jose Luis Rodriguez Zapatero told the Financial Times in an interview published on Monday.

With Greece battling a debt crisis that investors fret could spread to Spain, Zapatero is tasked with convincing investors it can tame a budget deficit that reached 11.4 percent of gross domestic product in 2009 while avoiding social conflict.

"We have a plan, a credible quantified plan which we have already begun to implement, a plan to reduce the public deficit," Zapatero told the FT.

"What we have to be judged on in the future is whether we gradually do implement all the different items included in that plan. We will certainly do so whatever the cost."

"If we have to make more cuts or demand more austerity than we will do it," Zapatero said.

Spain has promised to slash its public deficit to the EU guideline of 3 percent of GDP by 2013. Central to achieving that will be a 50 billion euro austerity plan which will include a hiring freeze for the public sector of 4 percent.

When asked about labour market reform Zapatero said this was "essential" and that talks had started between business leaders and trade unions, key allies of the socialist Prime Minister.

"(W)e are doing this most intensely and we want to reach an agreement that includes more flexibility while preserving guarantees and rights of employees," he said.

Job creation is a key challenge with government forecasts predicting 19 percent of the working population will be out of work this year.

But Zapatero remained optimistic that Spain, the euro zone's fourth-largest economy, would overcome its financial difficulties.

"Spain is not going to fall back into the second division. Yes, times are difficult, but we will be in the first division, with the strong countries," he said.