Spain's government declared confidence in the nation's solvency Friday as investors fearing a financial breakdown sent its debt risk premium soaring to a euro-era record.
"We want to send a message from the government of Spain of confidence, of security in the solvency of Spain as a country," Budget Minister Cristobal Montoro told a news conference.
The solution to the market turmoil lay with the euro and the European Union, Montoro said after a cabinet meeting.
"We are making reforms, we are cleaning up the banking and the public sectors and that, along with other reforms, will create growth, employment and allow us to exit the crisis with an integrated Europe."
The debt risk premium -- the extra rate charged on Spanish bonds when compared to safe German debt -- hit 5.48 percentage points, the fourth record in five days.
As a sense of near panic took hold, latest figures showed a net 97 billion euros ($121 billion) of investors' money fled Spain in the first three months of the year -- the highest on record.
Further destabilising the market is the prospect of a Greek election June 17, which could lead to its exit from the eurozone with unknown consequences for the region, and in particular number-four economy Spain.
The Italian government announced it had invited Spain, France and Germany to a Rome summit on June 22 to grapple with the crisis just days after the Greek decision.
On the markets, investors fret over where Spain will find the money to repair the balance sheets of its stricken banks and at the same time rescue regional governments struggling to finance heavy debts.
Spain's 2008 property sector crash evaporated much of the value of banks' real estate assets; and it eradicated at a stroke a source of plentiful income in the regions.
Montoro had some good news, however, reporting that the regional governments, responsible for half of state spending, achieved balanced budgets overall in the first quarter of 2012.
Adding up the deficits of the 17 regional governments, "the sum is zero", he said.
Regions managed to trim budgets through austerity measures and at the same time they benefitted from larger transfers of funds from the central government during the period, he said.
Budget deficit figures can fluctuate during the year, however, depending on when households and businesses pay their taxes, and on the timing for major items of expenditure.
Many of the Spanish regions are locked out of the financial markets, which demand exhorbitant interest rates to lend them money, and Montoro said the government would soon come to their help.
As soon as next week, the government would approve a "financial instrument to help liquidity in the autonomous regions", he said.
The Economy Ministry said this week it would approve on Friday a scheme for the regions to jointly issue bonds, so-called hispanobonos, which would be guaranteed by the state.
The government rode to the rescue once already in mid-May, taking out a 30-billion-euro line of credit to help towns and regions to settle pending invoices with suppliers.
In 2012, the regions have nearly 36 billion euros to pay in debt financing, and Spanish media say they must raise another 15-16 billion euros to finance their public deficits.
Last year, the shortfall between spending and income in the regions was responsible for two-thirds of the country's deficit slippage.
Spain registered a public deficit of 8.9 percent of economic output instead of the promised 6.0 percent last year; and the regions posted a deficit of 2.94 percent of output instead of the required 1.3 percent.