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Zapatero : "No more cuts planned"

Source: Reuters - Sun 21st Nov 2010

Spain has no plans for more spending cuts on top of May's austerity measures, Prime Minister Jose Luis Rodriguez Zapatero said in an interview with El Pais newspaper on Sunday.

The government implemented a 15 billion euro austerity package six months ago, including civil servant salary cuts and scrapping bonus payments to new mothers, in an attempt to deflect fears Spain was heading for a debt crisis.

"It is not foreseen that more cuts will be necessary," Zapatero told Spain's most-read newspaper.

ECB Executive Board Member Jose Manuel Gonzalez Paramo said on Friday Spain's reforms were enough to protect it from contagion from debt crises elsewhere in Europe, although he said also that any extra steps taken by EU states would be welcome.

Markets have started to differentiate Spain from other potential euro zone trouble spots such as Portugal and Ireland, which is thrashing out a multibillion euro international aid deal to support its massively indebted banks.

Spain drew solid demand for 3.6 billion euros of long-term debt on Thursday, showing buyers took a relatively positive view of Spain's prospects after measures taken this year including labour reform and an overhaul of the country's banking system.

The Socialist prime minister said it was essential pension reform was carried out by the first quarter of next year. The reform would have to show savings but would not necessarily mean a cut in payments, he said.

He declined to say if he would stand in elections in 2012, saying he would take that decision when the time was right.

Zapatero, in power since 2004, has lost popularity in a country suffering the aftermath of a property crash which has saddled households with record levels of debt and helped push unemployment up to the highest among wealthy nations.

The Socialists are trailing the centre-right Popular Party (PP) by around 13 percentage points, a poll in right-leaning La Razon newspaper showed on Sunday, with Zapatero's approval ratings lagging that of PP leader Mariano Rajoy.

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