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UPDATE 2-Spain's Salgado rejects comparison with Ireland

Published 11/22/2010, 06:15 PM
Updated 11/22/2010, 06:20 PM

* Spain does not need Ireland-style bailout - econ min

* No need for more austerity measures to reduce deficit

(Adds quote, details)

MADRID, Nov 22 (Reuters) - Spain does not need further austerity measures to cut its budget deficit, Economy Minister Elena Salgado said on Monday, rejecting any comparison with Ireland's appeal for a rescue from its debt crisis.

Spain has "absolutely no" need for a bailout like Ireland's, Salgado said in a radio interview radio on Monday morning. In the evening she told CNN+ television the government was taking sufficient measures to avert a debt crisis.

Spain's borrowing costs have soared this year as investors worry that its high deficit and its banks' exposure to bad loans from a property boom and bust could eventually push it into a Greek or Irish-style debt crisis.

The risk premium of Spanish benchmark 10-year bonds over German bunds rose on Tuesday to about 210 basis points on concerns over contagion from Ireland.

"The main thing when comparing with Ireland is that our financial sector is strong. Not only have the stress tests shown that, but we designed a fund to help merge savings banks, of which only 11 billion euros has been drawn," Salgado told RNE radio.

Many of Spain's unlisted savings banks have merged as part of government measures to overhaul the sector, deeply wounded by the housing bust.

Salgado said that the euro zone had to coordinate economic policy better and reduce imbalances in competitiveness.

She said Spain's spending cuts -- the government passed the most austere budget in decades for 2011 -- were sufficient to reach its goals.

The government has vowed to cut the deficit to 6 percent of gross domestic product in 2011 from more than 11 percent of GDP in 2009.

But some economists have cast doubt on the 6 percent target since the budget is based on a forecast of 1.3 percent economic growth next year, well above consensus expectations.

"We don't need more measures, all that's needed is the ones that we've put in place to take effect," she told CNN+. (Reporting by Teresa Larraz and Martin Roberts, Writing by Fiona Ortiz; editing by David Stamp)

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