Spain raised nearly euro4 billion ($5.5 billion) Thursday in bonds in an auction that showed good investor interest despite the turmoil hitting markets on the fringes of the eurozone.
The government meanwhile moved on two other fronts _ tax policy and labor market reform _ to try to chip away at the budget deficit and a 21 percent unemployment rate.
The Finance Ministry said it sold euro3.95 billion in bonds of three different maturities, just shy of the euro4 billion ceiling the government had set.
These bonds, which mature in July 2019 and April and October of 2020, were an installment of a 10-year issuance carried out months ago. So yields in Thursday's auction are not strictly comparable to that of the last such auction held in July. Then, the average interest rate was 5.9 percent on bonds that mature in 2021.
On Thursday, the yields on the three classes of bonds were around 5 percent. The auctions were oversubscribed 1.9, 2.01 and 2.7 times.
Yields on Spanish 10-year bonds on the secondary market skyrocketed to euro-era highs in August, an indication that investors are worried about the impact on the country of another global recession and the Greek debt crisis. The yields came down only after the European Central Bank bought billions in Spanish and Italian bonds on the open market.
They have risen once again over the past two weeks, and on Thursday the spread between Spanish 10-year bonds and the German equivalent stood at about 350 basis points. The yield on the Spanish bond was 5.42 percent.
Finance Minister Elena Salgado gave details Thursday of a decree that will restore wealth tax _ a levy on a person's net worth _ which the same government had suspended in 2008. It said then that the suspension was a way to stimulate the economy as the economic crisis started to bite deep, and argued that the wealth tax hit the middle-class disproportionately hard.
Now the tax is back because the debt-laden Socialist government is desperate for revenue _ and general elections are scheduled for November 20. Many see the restoration of the tax, which will raise a relatively small amount of money, as a wink to leftist voters angry with the Socialists over deficit-cutting austerity measures.
The tax, expected to be passed in a Cabinet meeting Friday, will be in effect just for 2011 and 2012, and will target only the wealthiest Spaniards, taxing their net worth above euro700,000. That's about seven times the earlier threshold.
Salgado said the restored tax will affect an estimated 160,000 people _ Spain's population is 47 million _ and bring in about euro1.1 billion a year in revenue.
The government completed another about-face Thursday, this time on labor law and so-called garbage contracts in which workers have fixed term-rather than open-ended contracts. In 2006, the government passed a law under which anyone who has temporary contracts for two years or more has to be made a full-fledged employee, with job security and benefits.
But now, with the jobless rate so high, the Socialists have said any kind of contract is better than no job at all and Parliament on Thursday suspended the rule passed in 2006. So, for the next two years, temp contracts can be strung together one after another.
Conservatives favored to win the next election said they did not like the idea but abstained from voting, allowing the measure to pass.