Spain has been the slowest of the major EU economies to emerge from recession.

The bank said that Spain's large budget deficit remained a concern to the European Union amid fears that the crisis over Greece's debt load could spread to other countries with budget shortfalls.

The country's overall debt stood at 53 per cent of economic output last year, and its deficit was equivalent to 11.2 per cent of GDP.

Last week, Standard & Poor's cut Spain's credit rating from AA+ to AA amid fears the situation could worsen, pushing up Spain's borrowing costs.

The government has enacted a $66.22bn programme of spending cuts and tax rises aimed at getting the deficit down to the EU limit of three per cent by 2013.

Some observers are doubtful the government can achieve this aim due to Spain's low rates of economic growth.

The government has forecast growth of 1.8 per cent in 2011, 2.9 per cent in 2012 and 3.1 per cent in 2013, but the International Monetary Fund estimates that growth in Spain will be only 0.9 per cent next year.

However, Spanish and European officials have repeatedly denied that Madrid will need to request a multibillion dollar bailout package similar to that being pushed through to help Greece.