FRANKFURT (MNI) – Spain has met its deficit target for 2010 and
will do so this year as well, Prime Minister Jose Luis Rodriguez
Zapatero said in a television interview broadcast Tuesday.

There is no doubt that Spain’s smaller Iberian neighbor, Portugal,
will be able to finance itself without resorting to external help, the
Spanish leader stressed to Reuters Insider TV.

Speaking through an interpreter, Zapatero conceded that though his
country is making progress economically, it still faces a daunting task
in generating employment. Unemployment hovered around 20% for most of
the last year, though trended slightly downward in Q4, according to
Eurostat.

Numbers to be released soon “will confirm that our deficit targets
have been met” for 2010, the prime minister assured. “We have done what
we have promised. And in 2011 we will also meet our target.”

“Realistically, we are winning the battle” to remain stable and
solvent, he assured.

“We’ve seen how sovereign debt tensions go in cycles, when there’s
problems with one country they tend to extend to other countries. For
that reason, we have to keep our guard up,” he said.

“But I do have the perception that in recent weeks and months Spain
has won the confidence of the markets,” he claimed.

“I am convinced that Portugal will be able to finance itself,”
Zapatero said. The upcoming meeting of Eurozone leaders on March 11
should serve as a way to support the embattled neighbor. “That will
certainly allow for the reduction of tensions” on Portugal’s sovereign
debt situation.

Portuguese Finance Minister Fernando Teixeira dos Santos told the
Japanese paper Nikkei that his country will not need to resort to the
European Financial Stability Facility to fund upcoming redemption
payments.

Queried if the recent defeat of German Chancellor Angela Merkel’s
party will weaken the chance of reforms being agreed for the European
rescue fund in March, Zapatero remarked that he had full confidence in
the chancellor.

“We must strengthen the Eurozone, which as a whole is supported by
the countries that make it up,” he said. “To do that we must strengthen
the parts and strengthen the whole and that is the aim of the task we
have ahead of us.”

Spain has had positive growth for four quarters, albeit weak due to
the harshness of austerity measures, Zapatero commented. But he remained
moderately upbeat, given that growth is coming mostly from exports.

This “is good news, that means that Spain’s economy is gaining
competitively, because we are exporting more,” he argued.

Spain’s “big challenge” is creating employment and boosting
confidence to a point that businesses feel that they can hire, the prime
minister said. “That’s the great battle we have to win in 2011, to start
to generate jobs, and it’s the hardest one.”

Both Spanish and Portuguese spreads are slightly wider on the day
in early European trading. Portugual’s 10-year spread versus the
benchmark German Bund is 4 bps higher on the day at +419 bps. Spanish
bonds are 1 bp higher at +217 bps.

–Frankfurt bureau, +49-69-720142, frankfurt@marketnews.com

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