Spain's central government warned regional authorities that it will intervene in their financial affairs if they fail to meet deficit targets, much as Europe is doing with Greece.

Friday's cabinet meeting approved the draft Budget Stability and Fiscal Sustainability Law, which elaborates on the principle of budget stability encoded in Article 135 of the Constitution.

This is not the first time that the Popular Party (PP) government, in power since December, threatens the regions with direct action in a bid to ease market concerns about Spain's ability to contain its budget deficit, which was eight percent of GDP at the end of 2011. The 2012 target is 4.4 percent.

Treasury Minister Cristóbal Montoro said sanctions for offending regions included a fine of up to 0.2 percent of the regional budget.