The Prime Minister of Spain, Jose Luis Rodriguez Zapatero, has denied rumours that his nation is on the verge of asking the IMF and the EU for a bailout, despite a visit by the head of the IMF, Dominique Strauss-Kahn.

Mr Zapatero said that Spain does not need a bailout and that the visit by Mr Strauss-Kahn had been scheduled well in advance.

Spain recently introduced a tough set of austerity measures to ensure that it does not end up with a sovereign debt crisis like Greece. The move, while reassuring markets on Spanish debt also led to fears that the economic recovery in the eurozone maybe slower than previously hoped for.

Earlier this week it emerged that financial institutions in Spain are also finding it harder to get loans on the international markets. Spain however is planning on publishing the results of a so-called "stress test" of its banks in a move aimed at reassuring the markets that its banks will withstand the downturn.

Spain is currently having to deal with unemployment of 20 per cent and a budget deficit of 11 per cent.

Despite its problems EU leaders yesterday praised Mr Zapatero's handling of the situation and said they did not expect Spain to experience a Greece-style disaster.