Spain's austerity programme may be eased if the economy continues to contract, the European Union's top economic official said Monday.
Economy commissioner Olli Rehn suggested that Spain could be given more slack to meet the strict budget targets set out by the block to save the eurozone's fourth economy from bankruptcy.
"We take into account the growth outlook and the fiscal space of each and every country when we make the assessment," Rehn told reporters, in reference to an evaluation of Spain's performance due next month.
"If there has been a serious deterioration in the economy, we can propose an extension of the country's adjustment path," he said.
Spain's efforts to comply with austerity measures demanded by the EU have been hampered by a continued contraction of the economy and unemployment which rose to a record 26% in the last quarter of 2012.
Spain had committed to reducing budget deficit from 9.4% of GDP in 2011 to 6.3% in 2012 but analysts, including at the European Commission, predict it will miss the target.
Rehn said Spanish companies should be given easier access to credit if the economy was to buck the downward trend and generate new jobs.
He described "excessively tight financing conditions" as a major "bottleneck" for the government of Prime Minister Mariano Rajoy to tackle.
Brussels has already forecast Madrid would fall short of its 2013 budget target but Rehn tried to remain upbeat about Spain's path to recovery and the year ahead.
"This will be still another difficult year, but I'm confident that it will also be the year in which the corner is turned, in which Spain and the euro zone as a whole can move from stabilisation to a sustained recovery," he said.