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With tax revenues falling sharply as the recession deepens, on Tuesday Spain reported a deficit of 4 percent of GDP on its central government accounts in the first half of this year, above a goal of 3.5 percent set for the whole of 2012.

That target could be eased as Spain decides later in the year how to use an extra 1 percent cushion granted by the European Union in July when the country's deficit target was widened to 6.3 percent for 2012 from 5.3 percent initially.

The government announced a new 65-billion-euro austerity package in July, two months after stepping in to prop up major lender Bankia.

In June, it requested help from Europe to recapitalise its banks, battered by the collapse of a decade-long real estate bubble in 2008.

But the initiatives failed to calm investors for more than a few days, and Tuesday's gloomy numbers will do nothing to ease pressure on the bond yields that Spain needs to keep from rising to avert a full-fledged bailout.

The premium investors pay to buy Spanish over German debt was around 532 basis points on Tuesday, far below last week's euro-era highs on hopes the European Central Bank will announce stimulus measures, helping to bring Spanish and Italian borrowing costs down.

Tuesday's data showed Spanish and non-domestic banks moved 31.9 billion euros out of the country in May. The headline figure compared with total outflows of 26.6 billion euros in April and a peak of 66 billion euros in March.

The government, which expects the economy to shrink 1.5 percent this year and 0.5 percent in 2013, has passed some of the deepest budget cuts in decades to deflate one of the euro zone's largest budget deficits. The gap stood at 8.9 percent in 2011.

The tax hikes also passed under the austerity programme, including a 3 point rise in value-added tax, are expected to further dent high street spending.

"(Spain) needs more time to rebalance the economy and hit the deficit targets. The current framework is making Spain dig itself into a slightly bigger hole," Guillaume Menuet, economist at Citi in London, said.

Spain's struggling economy, which is expected to remain in recession well into next year, is at the centre of the euro zone debt crisis, and rising refinancing costs risk shutting the country out of international debt markets.

Domestic demand has stalled since the crisis started four years ago, while sky-high unemployment rates have further eroded consumer confidence. Retail sales fell by 5.2 percent year-on-year marking a 24th straight month of declines.