EU may give Spain more time to cut deficit: source

(BRUSSELS) - The European Commission may recommend giving crisis-struck Spain an extra year to meet its public deficit target but tough conditions would be tied to the reprieve, an EU source said on Wednesday.

Spain is supposed to slash the deficit from last year's 8.9 percent to 3.0 percent of economic output in 2013, but the commission could ask EU partners to push the deadline back to 2014, the source said.

"We are considering this option and we may announce it today," the source said on condition of anonymity as the EU's executive commission prepared to release economic recommendations for all 27 EU nations.

The euro tumbled while the borrowing costs of Spain soared on Wednesday as investors showed increasing concern that the country will need an EU bailout despite having launched a raft of austerity measures.

Spain is struggling to overcome a mountain of problems: it is forecast to be the only eurozone country still in recession next year, around a quarter of the population is unemployed, and its banks are buried under bad debt.