By Nicola Cowell

SPAIN has sold more than 3.3 billion euros of national debt in five-year bonds.

The five-year debt attracted more than 50 per cent demand from foreign investors at a recent debt auction.

The news comes after concerns in July that Madrid’s debt was only attracting Spanish investors.

But this unexpected demand from non-residents has been put down to the fact that there is now less concern over Spain’s ability to recover its huge debts, with firm cost-cutting measures in place throughout the country.

Cagdas Aksu from Barclays Capital in London said: “Things in Spain are gradually going in the right direction, not just on the budget but also with the stress tests, for example.”

Most of Spain’s banks passed stress tests published earlier this year, and the country’s deficit is shrinking after almost two years in recession.

Although still the euro-zone’s third largest deficit, Spain now has a debt of 53 per cent of its overall income, which is less than the average of 79 per cent throughout Europe.

And the government’s drastic money-saving measures, including public-sector wage cuts and an increase in taxes, are the most serious cuts it has made in three decades.

The debt auction was the first of three scheduled to take place in Spain this month.