Bloomberg News

Spanish Social-Security System Won’t Record 2011 Surplus

January 03, 2012

(Adds unemployment data, comment from Economy Minister, starting in third paragraph.)

Jan. 3 (Bloomberg) -- Spain’s social-security system won’t post a surplus in 2011, adding to pressure on Prime Minister Mariano Rajoy to take additional austerity measures to meet budget targets.

“There will be no surplus whatsoever,” Tomas Burgos, the state secretary for social security, said at a press conference in Madrid today. The former Socialist government had forecast a surplus of 0.4 percent of gross domestic product, Burgos said, adding it is too early to know what the exact balance will be.

Registered unemployment rose for a fifth month in December as the economy weakened, data today showed. Economy Minister Luis de Guindos described the the data as “bad” and said there must be reforms to boost growth as well as measures to cut the budget deficit, the euro area’s third largest.

Rajoy’s People’s Party government, which took over from the Socialists on Dec. 22, announced 14.9 billion euros ($19.4 billion) of spending cuts and tax increases on Dec. 30 as it forecast the 2011 public deficit, which includes the central government, semi-autonomous regions and the social security, will be 8 percent of GDP instead of a 6 percent target. That means the government has to cut the deficit by half this year to meet the 2012 commitment.

“We must take into account that this is a significant slippage,” de Guindos told reporters after a swearing-in ceremony for officials at the Economy Ministry. Measures to reduce the gap must be “complemented with reforms to increase the potential growth of the Spanish economy,” he said.

The yield on Spain’s 10-year bond rose 18 basis points to 5.28 percent as of 2:12 p.m. in Madrid. That compares with a euro-era high of 6.78 percent reached on Nov. 17.

“The markets’ perception will have to be positive because Spain’s government is a government which fulfills its commitments and will implement an aggressive reform,” de Guindos said.

--Editors: Fergal O’Brien, 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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