Spanish Prime Minister Mariano Rajoy said that Spain’s economy needs to undertake further reforms that would help it become more flexible and competitive, after the International Monetary Fund (IMF) called for wider reforms.
Spain has to cut down its budget deficit to 5.3% from 8.5% in 2011, a target many economists find unrealistic.
As part of the reforms, Spain needs to raise revenue from taxes and look at further spending cuts.
Meanwhile, several Spanish banks have been bailed out by the Eurozone as a result of which thousands of demonstrators gathered on Saturday to protest against the management of Spanish banks.
Spain was given 100bn euros ($125bn; £80bn) in emergency loans to help its struggling banks, which are severely under-capitalised following the collapse of the Spanish property market.
Bankia, Spain’s conglomerate bank and fourth largest bank, alone lost 3bn Euros in 2011.
Earlier this year, the government of Spain carried out austerity drives including freezing unemployment benefits and public sector’s workers’ salaries, slashing departmental budgets and increasing tax on large companies.
But the spending cuts and tax rises have undermined the economic recovery in Spain. The country is back in recession and has the highest unemployment rate in the eurozone, with almost one in four workers out of a job.