Bailout Terms Eased, Spain Must Now Meet Them EARLY Tuesday, Spain squeezed additional concessions from its euro zone partners, both in terms of guaranteeing rescue aid for its banks and loosening budget deficit targets. Now, though, comes another challenge for Prime Minister Mariano Rajoy: ensuring that Spain can actually meet the relaxed deficit goals that it negotiated. On Wednesday, Mr. Rajoy is expected to announce to Parliament yet another package of austerity measures, this time meant to lower Spain's deficit to 6.3 percent of gross domestic product, as agreed to in Brussels on Tuesday. Only four months ago, Europe had set a deficit target for Spain of 5.3 percent of G.D.P., but it has become clear that the country, deep in recession, is not going to come close to meeting that goal. The latest austerity steps are expected to be a blend of spending cuts and tax increases, as well as other measures like extending the working hours of civil servants. All of that, however, could sink Spain deeper into recession, notably by stifling consumer spending. "We are in effect talking about strangling further an economy whose slowdown has recently been worse than expected," said Jordi Fabregat, a finance professor at the Esade business school in Barcelona. Given the seriousness of Spain's financing problems, there is no other option but to cut more, but somehow not to the point where you kill off the economy altogether. After another round of negotiations, finance ministers from the 17 euro zone countries reached a tentative agreement early Tuesday in Brussels on the terms of Spain's banking bailout, including a guarantee to make available by the end of this month 30 billion euros (about $37 billion) of the 100 billion euros (about $123 billion) of rescue assistance that was pledged last month. On news of that agreement, investors on Tuesday slightly reduced the pressure on Madrid's borrowing costs. The yield, or interest rate, on Spain's benchmark 10-year government bonds fell to 6.73 percent on the open market, from almost 7 percent on Monday. Even that slightly lower level, though, is seen as unsustainable in the medium term. Additional banking bailout payments are expected this year after Spain completes further audits of its troubled banks. In return, however, Spain's banking overhaul will be subject to tighter European monitoring. Spain's European partners are also demanding more evidence from Mr. Rajoy that he can clean up the nation's public finances and enforce economic changes that would return it to growth. Mr. Rajoy's conservative Popular Party was elected in November largely because voters punished the previous Socialist administration for its economic mismanagement. Instead of fueling confidence, however, Mr. Rajoy and his team have since broken most of the economic pledges made to voters. On Wednesday, for instance, Mr. Rajoy is expected to bow to European pressure and announce an increase in the value-added tax, a form of sales tax. As recently as April, Luis de Guindos, the economy minister, insisted that raising the tax was "absolutely" off the agenda for this year because it could choke off consumer spending. Some analysts warn of the danger of a steep fall in tax revenue in the second half of 2012, saying higher taxes will reduce private spending and create further incentives for tax evasion. "The current situation demonstrates a clear inability to collect taxes," Santiago López Díaz, an analyst in Madrid for the brokerage house Exane, wrote in a note to clients. Budget data released last month by Madrid indicated how far off target the country was from its deficit-reduction targets. For the first five months of the year alone, the central government's budget deficit was already at 3.41 percent of G.D.P. Even if Mr. Rajoy manages to tighten budgetary control at central government level, Spain's fiscal discipline is also dependent on 17 regional governments that account for half of the country's public spending. Madrid has ordered regions to cut their deficits to 1.5 percent of G.D.P. this year.