FIAT DEALERS GARAGES

By Tomás Cobos

NAVACERRADA, Spain, July 7 (Reuters) - Spanish Prime Minister Mariano Rajoy said on Saturday his government would take further deficit-cutting measures in coming days and he renewed a call on euro zone leaders to quickly implement a rescue plan for Spain's banks.

Speaking at a conference in a town in the mountains outside of Madrid, Rajoy also said that Spain's 17 autonomous regions must deepen their efforts to cut spending.

The conservative premier is expected to announce on Wednesday in parliament budget measures including a hike in the value-added tax and cuts to benefits for public workers.

Getting Spain's deficit under control, along with the rescue package of up to 100 billion euros for its troubled banks, are key to winning back investor confidence. Borrowing costs have soared, threatening to leave Spain in need of a bailout and escalating the euro zone debt crisis to a dangerous new plateau.

On Friday the yield on Spain's benchmark 10-year bond breached the 7 percent level that is seen as difficult to sustain in the medium term.

"In the coming days we will take decisions to reduce the public deficit. We must take them again," Rajoy said in a speech at the conference held by the FAES think-tank of his People's Party. He forecast "uncomfortable" decisions pleasing to no one.

Spain far overshot its deficit target last year, ending 2011 with a shortfall equivalent to 8.9 percent of GDP. Rajoy's centre-right government, which took office in December, is struggling to slice the deficit to the 5.3 percent level pledged to the European Union earlier this year.

The government has announced savings of more than 40 billion euros this year, both in the central government and regional administrations. But with the economy in recession and tax income flagging, Rajoy has had to come up with more spending cuts and tax hikes.

EU leaders agreed to help Spanish banks with aid and to use European rescue funds - the EFSF and ESM - to buy Italian and Spanish debt and help bring down their borrowing costs.

But the details have yet to be worked out and there is public debate over whether European funds will be injected directly into Spanish banks - so that the aid does not weigh on Spain's public accounts - or whether the government will ultimately liable for the aid.

Rajoy said the measures must be made concrete very soon to restore credibility to the common currency area.

"We've reached important agreement, but what will determine the true success of the summit is that those decisions are turned into concrete, palpable realities, and that it is done in a rapid, agile and effective way ... This is where the credibility of the entire European project is at play." (Writing by Fiona Ortiz; editing by Teresa Larraz and Mark Heinrich)