Spain cut its public deficit below seven percent of gross domestic product in 2012 and escaped financial "disaster", Prime Minister Mariano Rajoy said on Wednesday.
"We have left behind an imminent threat of disaster," he told parliament in a state-of-the-nation address.
He said his tough deficit-cutting measures had brought the deficit down from 9.4 percent of GDP in 2011 to below 7.0 percent in 2012 -- against a 6.3-percent target set by the European Union.
"The path is still long and hard," he warned however.
Speculation peaked last year that Spain would need to be bailed out by its eurozone partners.
Defending his spending cuts and tax rises launched last year, Rajoy also announced a series of reforms aimed at stimulating economic activity in Spain.
These included easing the deadlines for value-added tax payments by small and medium-sized businesses.
Spain is deep in recession with an unemployment rate of more than 26 percent following the collapse of a building boom in 2008.