UPDATE 1- Spain govt says confident can ride out EU storm

* Spain deputy PM says no risk of Greek contagion

* Deputy PM says economy is reliable

* Spain will meet deficit target

* Sees timid economic growth

(adds quote in para 18)

By Blanca Rodriguez and Judy MacInnes

MADRID, May 4 (BestGrowthStock) – Spain’s Socialist government is
confident it can deliver on labour reform and has no doubts
about its ability to ride out the storm rocking the euro zone
and meet fiscal targets, the deputy prime minister said on
Tuesday.

“The Spanish economy is reliable. We will meet our deficit
target,” Deputy Prime Minister Maria Teresa Fernandez de la Vega
told Reuters in an interview.

Fears that Spain could enter into a debt spiral like Greece
and be hit hard as concerns over weak euro zone members spread
were unfounded, De la Vega said.

“There is no risk of any contagion effect from Greece. The
fears are unfounded. We will continue to do our homework in
terms of meeting our commitments,” she said.

Renewed selling gripped euro zone financial markets on
Tuesday as concerns mounted that the record 110 billion euros
EU/IMF rescue package for Greece would not stop a debt crisis
spreading to other weak euro zone members. Spanish stocks closed
more than 5 percent lower.

Spanish Prime Minister Jose Luis Rodriguez Zapatero
dismissed as “complete madness” a market rumour that his country
would ask for 280 billion euros in aid from the euro zone.

The Spanish government has promised 50 billion euros of
budget cuts to 2013 to bring the country’s deficit down to 3
percent of GDP from 11.2 percent last year, through a hike in
value added tax and a freeze on civil servants’ wages.

De la Vega played down that Spain may need to introduce
further austerity measures to meet its budget targets.

“The most important thing at the moment is to carry through
with the measures we have already announced,” she said.

KEY LABOUR REFORM

However, De la Vega said there could be significant advance
later this month on reforming the country’s inflexible labour
market.

Along with budgetary consolidation, labour reform is the
most pressing element for Spain, which currently has the highest
unemployment level in the eurozone running at around 20 percent,
economists say.

“The talks are going well. I believe that there will be an
important advance made in May towards reaching an agreement,”
between unions, employers and the government, De la Vega said.

Labour market reforms, which aim to make it easier for
companies to hire and fire, have met with resistance from the
country’s powerful unions but the government has said it will
not attempt to pass any reform without agreement from both
unions and business leaders.

Spain’s economic challenges have mounted as the country has
still not rebounded from recession — one of the few in Europe
not to do so — after its worst downturn in decades as a
property boom went bust.

The country has had seven consecutive quarters of negative
growth.

De la Vega said the economy was on the mend, although she
predicted that only at the end of this year would things turn
positive.

“We are going to return to a positive situation from a
negative one,” she said. “We are already seeing positive signs.
We hope that by end of year…slowly growth will return.”

“We still have a difficult road ahead,” she added.

Turning to the euro currency, she said Spain had been
working to strengthen the euro during the European Union
presidency which it currently holds.

“We will continue working to ensure that the euro exits this
crisis strengthened,” she said.

Investing Research

(Reporting by Judy MacInnes and Blanca Rodriguez; editing by
Angus MacSwan)

UPDATE 1- Spain govt says confident can ride out EU storm