Bloomberg News

Spain Sticks to ‘Ambitious’ 6% Deficit Target, Salgado Says

October 14, 2011

(Updates with Salgado quote in third paragraph, bonds in fourth. For more on euro debt crisis, {EXT4 <GO>})

Oct. 14 (Bloomberg) -- Spanish Finance Minister Elena Salgado said the nation is sticking to its “ambitious” budget deficit target even as growth slows and borrowing costs rise.

Spain has pledged to cut its budget shortfall to 6 percent of gross domestic product this year from 9.2 percent in 2010.

“We are sticking to the ambitious 6 percent target which we consider cannot be renounced,” Salgado said in a Madrid news conference today. “The central government’s budget situation is better than forecast” due to 1.8 billion euros ($2.5 billion) in revenue from the auction of radio spectrum and debt servicing costs that were 2 billion euros less than budgeted, Salgado said.

Spanish, Italian and Greek bonds fell today after Spain’s credit rating was cut yesterday for the third time in three years by Standard & Poor’s to its fourth-highest investment grade. Group of 20 and International Monetary Fund officials indicated ahead of a meeting today in Paris that the IMF may seek additional funds to shelter nations such as Spain and Italy from contagion from a sovereign debt crisis that threatens to trigger another global economic slump.

Spain’s 10-year bond yield rose 4 basis points to 5.25 percent. Spain is paying more than twice what Germany pays to borrow for a decade even after the European Central Bank stepped in to prop up its bond market starting on Aug. 8.

The deficit will grow less in the second half of the year than in the first, Salgado said. The budget gap increased in the first two quarters because of accounting adjustments made by the statistics institute INE, Salgado said, adding that the government expects to publish in the coming days a summary of the fiscal consolidation plans adopted by the nation’s 17 semi- autonomous regions.

--With assistance from Charles Penty in Madrid. Editor: Andrew Davis, Eddie Buckle

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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