Rajoy met with his health and education ministers yesterday to discuss cuts of more than 10 billion euros ($13 billion) as the government reiterated its pledge to reduce the deficit to 3% of gross domestic product next year. That includes plans to accelerate the sale of stakes in lenders under government administration, according to an e-mailed statement.
Spanish bond yields rose today, after surging the most since January last week amid investors concern that Rajoys government may join Greece, Ireland and Portugal in requesting an international rescue. Spains premier spoke on April 4 of extreme difficulty as the country barely covered its minimum target at a debt auction.
As a result of Spains challenges, sentiment towards its sovereign bonds is now the bellwether for Europes debt crisis, Mansoor Mohi-uddin, chief currency strategist at UBS, wrote in an e-mailed note on April 7. If investor appetite wanes, then currency markets will start to price in either ECB rate cuts to help restore sentiment, or Madrid requires external assistance from its European Union partners.
The yield on Spanish 10-year bonds rose 11 basis points to 5.86% at 10:16 am in Madrid.
Rajoy will spell out his governments planned reforms to a meeting of Peoples Party parliamentary deputies tomorrow, an official in the governments communications department, who asked not to be named in line with its policy, said on Monday. Health and education, the areas that Rajoy said he would cut, are controlled by regional administrations, and the premier will meet on Tuesday with Esperanza Aguirre, the head of the Madrid region.