Spanish PM calls for eurozone fiscal authority

The Spanish prime minister Mariano Rajoy has called for setting up a central fiscal authority for the eurozone to harmonise fiscal policies of member states and to allow centralised control of finance in order to strengthen the common currency.

The European Union needs to strengthen its institutional architecture to advance their integration and cede sovereignty in tax matters, Rajoy said on Saturday while concluding an economic circle meeting in Sitges, Barcelona.

Spain, the fourth-largest economy in the eurozone, is under pressure to spell out its plans to recapitalise its struggling banking sector, including the already nationalised major bank Bankia and reduce the government's budget deficit in order to come out of the debt crisis caused by the crash in Spanish property markets.

Many believe that Spain could be the next country, which needed to be rescued through an international bailout, after Greece, Ireland and Portugal.

Reacting to recent media reports on bailout talks between Spain and the International Monetary Fund (IMF), both denied any discussions on contingency plans for the financial rescue of the troubled eurozone economy. (See: No bailout talks on Spain: IMF)

Spain's 2011 budget deficit was 8.9 per cent of gross domestic product (GDP), well above the set target of 6 per cent. The country aims to bring it down to 5.3 per cent, still above the EU's limit of 3 per cent.