February 5, 2010 / 1:28 AM / in 8 years

Zapatero says Spain's financial system "solid"

* Spain’s financial system “solid”

* Country faces big economic challenges, says Zapatero

* Stocks, bonds pushed down by deficit fears

WASHINGTON, Feb 4 (Reuters) - Spanish Prime Minister Jose Luis Rodriguez Zapatero, facing investor concerns about Spain’s indebtedness, said on Thursday his country was financially “solid” and would rein in its public deficit.

Speaking at a conference in Washington, Zapatero said Spain faced big economic challenges, but did not have to inject funds into its financial system like other countries.

"That will help reduce the public deficit," he said, addressing one of the main worries that made stocks .IBEX plunge almost 6 percent on Thursday and increased pressure over bonds.

His comments seemed aimed at defusing market fears over fiscal problems in heavily indebted countries such as Spain, Greece and Portugal that sent equity markets tanking across Europe and the U.S., and took a toll on the euro. [ID:nLDE6130RE] [ID:nLDE61314N] [ID:nN04247591

“This is not an easy time. There are big fundamental economic challenges for Spain and many other countries,” he told U.S. political and business leaders gathered at a conference organized by the Atlantic Council.

But he added: “Spain has a solid financial system.”

“The fundamentals of Spain’s strength are solid,” he said, blaming the market fears on “speculators” seeking short term benefits.

Zapatero’s center-left government has come under crossfire at home by unions organizing protests against his pension reform plans and the conservative opposition Popular Party threatening to call a vote of no confidence in the Parliament.

The Spanish government said on Wednesday its budget deficits for the next three years would be higher than previously forecasted, reinforcing those who fear he will find it hard to cut spending with unemployment nearing 20 percent.

Zapatero was the guest-speaker on Thursday at a National Prayer Breakfast also attended by President Barack Obama. He also met with U.S. business leaders and encouraged them to invest in Spain.

Reporting by Esteban Israel; Editing by Bernard Orr

Our Standards:The Thomson Reuters Trust Principles.
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