MADRID: Spain’s sovereign borrowing costs plummeted, heralding a dramatic market turnaround for debt-struck euro zone nations whose financial plight had once threatened to tear apart the entire bloc.

After years of budget cuts and tough reforms to curb soaring debt — which unleashed mass protests — Spain, Portugal, Ireland and Italy appeared to have won back the confidence of investors.

“The risk associated with the eurozone has reduced significantly in the past few months,” said Christian Parisot, an economist at Paris-based investment bank Credit Agricole CIB.

Falling sovereign yields help to boost the economy, spilling over into cheaper loans for business while easing the pressure on governments to impose yet tougher austerity measures on their people.

“These countries are reaping the benefits of their serious structural reforms,” said Christian Schulz, senior economist at German private bank Berenberg.

“There is a broad strong market sentiment which is getting ever more robust and resilient which is positive for the eurozone periphery,” he said.

Spain’s borrowing costs tumbled in its first major debt auction of 2014 as it raised 5.3 billion euros ($7.1 billion) in five- and 15-year bonds, just hours before Portugal was due to hold its first medium-term syndicated bond issue.

Day-to-day trading on the secondary markets was more dramatic, with the Spanish five-year bond yield plunging to 2.235 percent — the lowest since it joined the single currency — from 2.326 percent the evening before.

The 10-year bond yield for Portugal, which is due to exit its rescue program on May 17, fell to 5.374 percent late morning from 5.412 percent at the previous close.

“The decline in Spanish yields is clearly justified by the ever stronger return to growth in Spain, and also in Portugal,” Schulz said, pointing to a similar improvement in Ireland and to some extent Greece.

Spain timidly emerged from recession in the third quarter of 2013, with official data showing growth of 0.1 percent, but the unemployment rate remains painfully high at about 26 percent.

On Tuesday, Ireland took a major step on the road to economic recovery with its first bond issue since exiting its international rescue program.

It raised 3.75 billion euros in a sale of 10-year bonds, with the yield at 3.543 percent, while demand reached 14 billion euros — hailed by the authorities as a sign of renewed appetite for Irish debt.

Demand for euro zone debt has been driven largely by investors seeking higher returns for their money, backed by the reassurances by the European Central Bank, analysts say.

After international authorities bailed out Portugal and Ireland in 2010, economists warned that Spain or even Italy could be next.

The jitters prompted the European Central Bank to promise it would prevent struggling countries dropping out of the eurozone and defend the single currency come what may.

“Ireland, Portugal, Spain are racing ahead because they have done their homework, they have had their bailouts, they have had their reforms, they had them early,” Schulz said.

“Italy is following, it had its reforms a bit later than the rest and maybe not as strong as the rest,” he added.

“And Greece and France are behind. Greece because its problems are simply much bigger and France because it has not acted yet.”

Greece, the first eurozone country to need a bailout, while making substantial progress in dealing with its deep problems, still has a mountain to climb in dealing with a huge overhang of debt.

France’s economy contracted 0.1 percent in the third quarter of 2013, though it hopes to have dodged recession with an end-of-year return to growth.

On the 10-year government bond market, Italian yields fell on Thursday morning to 3.863 percent from 3.884 percent the previous close.

But Greek yields climbed to 7.729 percent from 7.710 percent and French yields, while much lower than in the eurozone periphery, edged up to 2.542 percent from 2.510 percent.