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Spanish Government President José Luis Rodríguez Zapatero on Monday acknowledged that his administration were giving "priority" to talks with Basque nationalist party the PNV.

With regard to the latter''s demands for greater self-governance for the Basque Country, Zapatero said he would only be favorable to dialog regarding "any transfer of power that falls within the statutory framework and, furthermore, which influences economic and employment matters".

The Spanish government is currently focused on passing its 2011 budget this autumn which, if it fails to get parliamentary approval, would mean the risk of early elections.

During a press conference given in Shanghai, the Spanish premier confirmed there would be no "substantial" tax reforms in the latest budget and signalled that any changes to take effect would depend on current negotiations between the government and other parliamentary groups.

Greater autonomy

The PNV has offered its support to the latest budget though only in return for more political self-governance. Aware of its negotiating power, it has already started to signal the threat of early elections if the budget is not passed.

"(Without a budget) it would be inconceivable and irresponsible for the government to try to complete its term," PNV spokesman Josu Erkoreka told Europa Press in a interview on Saturday.

The government admits it cannot roll over its 2010 budget to next year considering the significant cuts needed to bring the country''s public deficit, which stood at 11.2 percent of gross domestic product in 2009, within EU limits by 2013.