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Photograph: freeimages.com/Krzysztof (Kriss) Szkurlatowski

Eurozone finance ministers upped the pressure Thursday on Spain and Portugal to comply with EU fiscal discipline rules, with jitters about the two former bailout recipients feeding into volatility on financial markets.

Spain has the eurozone's fourth-largest economy, which it managed to rev up after having benefited from a 41-billion-euro (46-billion-dollar) bailout for its troubled banking sector. But Madrid has long struggled to stick to deficit targets.

Prime Minister Mariano Rajoy announced Thursday in Madrid that the 2015 deficit came in at 4.5 per cent of gross domestic product (GDP), breaking an EU-set target of 4.2 per cent.

Brussels had repeatedly warned Spain that it was off-course, but the ruling conservative People's Party government had rejected the warnings.

"Where [the Spanish budget] stands now, more measures are needed to get back on track," Dutch Finance Minister Jeroen Dijsselbloem told journalists in Brussels after chairing a meeting of the eurozone finance ministers' Eurogroup panel.

"When markets are volatile, you need to have a firm hand, and a firm hand, I would say, is let's stick to what we have agreed and try to fulfill our obligations," he said.

Rajoy said Spain had made great efforts to cut the deficit, achieving a reduction from 9.1 per cent to 4.5 per cent of GDP from 2011 to 2015. Spanish media attributed the 2015 target being exceeded by 0.3 percentage points to the government disbursing too much money to the regions.

Adding to the turmoil, Spain is struggling to form a new government following inconclusive elections in December. Rajoy won the most seats in parliament but not enough for an absolute majority.

Under EU rules, national deficits are supposed to be brought down to 3 per cent of gross domestic product. Within the eurozone, deficit sinners can face fines.

Spain's neighbour, Portugal, has faced pressure from the European Union over its public finances. Its executive, the European Commission, warned last week that Lisbon's 2016 budget risks violating the bloc's fiscal discipline rules.

The Eurogroup said in a statement that Portuguese authorities have committed to "prepare as of now additional measures to be implemented when needed to ensure that the 2016 budget will be compliant" with EU budget rules.

"We were ... very glad to hear from the Portuguese government that they are fully committed," Dijsselbloem said. "They've not just said we will abide by the rules, but we will also prepare and be prepared to do more, to take additional measures if necessary."

There have been some calls in Portugal for less austerity. The country's economy returned to growth in 2014, three years after receiving a 78-billion-euro international bailout.

But German Finance Minister Wolfgang Schaeuble on Thursday urged Lisbon not to reverse course.

"Portugal would be well advised ... not to further alarm the markets by stoking the speculation that it wants to reverse the taken path," he said in Brussels. "That would be very dangerous for Portugal."

The eurozone ministers on Thursday discussed Greece, another bailout recipient that has long been at the centre of economic concerns in the 19-country eurozone.

Greece's creditors are currently reviewing progress under its third, 86-billion-euro bailout. Once completed, this review would pave the way for a highly anticipated discussion on Greek debt relief. But Athens and the creditors first need to agree on controversial reforms, notably on pensions.

EU Economy Commissioner Pierre Moscovici spoke Thursday of "constructive talks" and "good progress" so far. He expressed confidence that the review could be completed by the end of March.

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