BRUSSELS Spanish Prime Minister Jose Luis Rodriguez Zapatero on Tuesday dismissed as "complete madness" a market rumor that his country would soon ask for 280 billion euros in aid from the euro zone.
He also told a news conference in Brussels that such rumors could damage Spain's interests and that this would be "intolerable" and Spain would fight them.
"I was told something about that rumor and the truth is I give it no credit, it is complete madness," he told journalists.
"These rumors can increase differences and hurt the interests of our country, which is simply intolerable and of course we intend to fight it," he said.
Spanish markets slumped on Tuesday on concerns of spreading contagion from Greece to other indebted euro zone countries.
The IBEX .IBEX stock index slumped 5.4 percent while Spain's biggest bank, Santander (SAN.MC), skidded 7 percent lower.
Spain's credit default swaps jumped 49 basis points to 212 basis points on Tuesday and the spread on its 10-year bonds over safer German Bunds rose to 116 basis points from 99 points.
Zapatero said Spain cannot be dictated to by markets.
"We cannot be watching what happens each day in the markets," he said. "I just stick to the facts. Spain has a public debt to GDP ratio 20 points lower than the European average."
Spain's budget deficit shot up to 11.2 percent of GDP last year but its total debt burden, at around 55 percent of GDP, is considerably lower than most European countries. Greece has twice as much debt.
Zapatero's government has promised to cut the budget deficit to below the EU limit of 3 percent of GDP by 2013.
The prime minister said he had confidence in Spain's public accounts and it was strongly solvent. But his country had to restructure its financial sector as soon as possible, referring to the country's indebted regional savings banks.
Zapatero, whose country holds the rotating European Union presidency, said euro zone leaders will give their definitive support for emergency loans to Greece at a summit on Friday.
(Reporting by Justyna Pawlak and Julian Toyer; writing by Axel Bugge)