Spain's finance minister says it was not close to needing a bailout last month and is not close to needing one now

Cindy Allen

MADRID , September 6, 2011 (Associated Press) – Spain's finance minister on Tuesday denied suggestions that the country was close to needing a bailout last month.

The denial from Elena Salgado comes a day after Spanish union leader Ignacio Fernandez Toxo reported that Prime Minister Jose Luis Rodriguez Zapatero had said he had seen "the edge of the abyss, in the form of a bailout for the Spanish economy" during an August 17 meeting with labor and business leaders

Salgado said in a radio interview that Spain was not close to needing a bailout, then or now.

"The first few days of August were a week of great nervousness, but I do not think we were on the verge of a bailout," Salgado said.

Yields on Spanish bonds -- a direct measure of investor jitters over a country's debt -- skyrocketed to euro-era highs in early August, prompting the European Central Bank to intervene in the markets to get the country's borrowing costs down.

Yields shot up again Monday amid widespread worries over the possibility of another recession in Europe and around the world, and eased somewhat Tuesday although not much. The yield on 10-year Spanish bonds stood at 5.22 percent, up from just over 5 percent last week.

Salgado conceded that growth in Europe but sought to downplay fears that Spain was heading back into recession.

"Between weak growth and a recession there is a big distance, which I do not think will be covered," she said.

Salgado spoke hours before unions and other activist groups were to hold a rally in Madrid against a constitutional amendment that will force the government to keep its future deficits very low. They fear it heralds drastic spending cuts on social policy and marks the end of the welfare state in Spain.

The measure was approved by the lower house of Parliament last week -- albeit amid furious opposition from leftist and regional-based parties -- and goes before the Senate on Wednesday, where passage is also expected. That is because the measure is backed by Spain's two main parties, the ruling Socialists and opposition conservative Popular Party.

The latter is heavily favored to win general elections scheduled for Nov. 20.

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