Quarrels over who bears the brunt of cuts worth more than 10percent of Spain's annual gross domestic product threaten PrimeMinister Mariano Rajoy's plan to tackle the euro area'sthird-largest deficit as a second bailout looms.

A seven-day rally that has driven Spain's 10-year yield to 6.1percent at 10:55 a.m. in Madrid from 6.9 percent may falter assquabbles between the government, regions and towns about spendingand tax receipt allocations hobble deficit reduction. Spain willmiss its targets for budget gaps of 6.3 percent of GDP this yearand 4.5 percent in 2013 as the nation's recession worsens,according to the median forecast of 12 analysts surveyed byBloomberg News.

“As budget deficit targets look unachievable, the risk of apotential full bailout of the Spanish economy is still there,”Jaime Becerril and Axel J. Finsterbusch, analysts at JPMorgan Chase& Co. in London, wrote in a note. “Further measures must betaken to restore market confidence.”