Crisis over, says Spanish PM

With Spain having spent weeks in the cross hairs of jittery world markets, Prime Minister José Luis Rodríguez Zapatero went on the offensive on Wednesday, defending the country’s solvency and saying his government had “the will” to reduce its fast-growing deficit.

With Spain having spent weeks in the cross hairs of jittery world markets, Prime Minister José Luis Rodríguez Zapatero went on the offensive on Wednesday, defending the country’s solvency and saying his government had “the will” to reduce its fast-growing deficit.

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But in an address to Parliament, the Socialist prime minister disappointed some by failing to spell out a clear plan of attack to reduce the country’s 19 per cent unemployment rate, the highest in the euro zone, or a time frame for labour reforms that analysts say are crucial for the country to stay competitive.

Instead, he reassured Spaniards that “recovery is not far away,” and reiterated a goal that seems an increasingly tall order: to cut $68 billion in state spending without slicing into the social benefits that he considers the hallmark of his administration. Last week, Zapatero said the government would extend unemployment benefits.

After two decades of dizzying growth — and the collapse of a housing bubble — there is a pervasive feeling in Spain that the party is over and that Zapatero is offering little more than palliatives for a national hangover.