Spanish stocks rally over Greek austerity vote

The Spanish stock market rallied on Wednesday, buoyed by the Greek parliament's approval of the first of two controversial austerity bills designed to stave off a default. Stocks were up 2.08 percent closing at 10,143.60 points.

The rally also came on the day that a top economy official told lawmakers that the government is slowly making headway toward meeting its target date for bringing down the nation's overall deficit to six percent of GDP by the end of this year.

Spain's budget deficit has narrowed in the first five months of the year through the end of May to 1.26 percent of GDP, or 13.76 billion euros. This is compared with the 1.72 percent, or 18.3 billion euros, it registered for the same period last year, Deputy Finance Minister Juan Manuel López Carbajo told a parliamentary budget committee.

The government collected some 46.4 billion euros in revenue during these five months, but its expenses during the period were listed at 60.2 billion euros, López said, adding that the nation's economy was progressing at "a stable pace."

Despite the positive signs, ratings agency Moody's warned this week that Spain's 17 regions won't meet their fiscal deficit target dates, which could pose a threat to the country as a whole. The 17 regions control a third of the country's spending and employ more than a third of all public-sector workers.

Economy Minister Elena Salgado told reporters outside Congress on Wednesday that the regions must all comply with bringing down their deficit to 1.3 percent of their GDP by the end of the year. Some of the most-indebted regions include Andalusia, Catalonia and Valencia.

The markets started the day upbeat with a 0.88-percent rally as investors were optimistic that Greece's lawmakers would pass the belt-tightening measures. This optimism allowed the bourse to rally up to three percent during the day. But by the time it came down to a vote in Athens, Spanish stocks dropped to two percent eventually closing slightly above that figure.

Among the big traders on the Ibex 35 were Grupo Santander, up 2.14 percent, BBVA, up 2.27 percent, and Iberdrola, up 1.15 percent.