MADRID, April 7 (UPI) -- Spain tried to counter fears that it will become the next victim of the eurozone debt crisis after Portugal, following significant pressure from its allies, requested an EU bailout.
The risk of contagion in Spain "is absolutely ruled out," Spain's Economy Minister Elena Salgado was quoted as saying Thursday by British daily The Guardian. "It has been some time since the markets have known that our economy is much more competitive."
Spain Thursday sold a package of three-year bonds, with its borrowing costs dropping in the process, sparking fresh hopes that it can manage without EU money.
Aching under huge borrowing costs because of slow economic growth, Portugal Wednesday decided to seek an EU bailout expected to add up to more than $114 billion.
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"Markets have long expected this," Rainer Bruederle, the economy minister of Germany, Europe's largest economy, said in a statement. He said the government in Lisbon should now try to increase the competitiveness of the Portuguese economy and reign in the national budget.
The bailout came less than a month after Portuguese Prime Minister Jose Socrates resigned, plunging Portugal into what could become a sustained period of political instability.
Socrates, still reigning prime minister until elections are conducted, said Wednesday that going to the EU for money was "the last resort." Portugal is the third eurozone member to have asked for a bailout after Greece and Ireland.
Analysts have given conflicting outlooks what that means for neighboring Spain, which has suffered a housing market crash and high unemployment.
While some say the Portuguese bailout increases chances of a negative chain reaction spreading to Spain, others said it diminishes them.
The Spanish government has pushed through painful budget cuts and insists its economy is stable, adding that it won't need bailout money.
Yet while the Spanish public deficit might be manageable and its large private banks are healthy, an array of local banks is in trouble because the banks lent excessively during the country's real estate boom.
EU leaders at a summit in Brussels last month agreed to a major overhaul of the bloc's finance architecture to calm markets and create a safety net to prevent future debt crises.
The three-tier reform includes a permanent crisis fund to save financially troubled member states, tighter rules and sanctions for members that accumulate too much debt and the first tacit steps toward a joint economic policy.
