Bloomberg News

Montoro Says EU Should Ease Spain’s Deficit Goal Amid Recession

January 23, 2012

Jan. 22 (Bloomberg) -- Spanish Budget Minister Cristobal Montoro said the European Union should ease the nation’s budget- deficit target for this year as the economy suffers its second recession in two years.

“If Brussels doesn’t adapt the stability program to the new scenario of a recession, it won’t be realistic and not only will Spain sink but the whole of Europe,” Montoro said in an interview with Barcelona-based La Vanguardia newspaper in comments confirmed by a Budget Ministry spokeswoman today.

The People’s Party government, in power since Dec. 21, inherited a deficit target for this year of 4.4 percent of gross domestic product, after the shortfall exceeded the target last year and amounted to 8 percent. The 2012 goal was based on an estimate Spain would grow 2.3 percent, while the government now says the economy is in a recession.

Montoro’s comments contrast with those of Deputy Prime Minister Soraya Saenz de Santamaria, who told reporters on Jan. 20 the government is “determined” to meet the current target. Economy Minister Luis de Guindos, who will attend the euro region meeting of finance ministers Monday, wrote in the Wall Street Journal on Jan. 19 that the targets must be met, and reiterated his position in an opinion piece in El Mundo today.

The PP government doesn’t plan to make its own growth forecasts and will use the next estimates made by the European Commission instead. Montoro said that the International Monetary Fund forecast, published by Ansa news agency last week, that Spain may contract 1.7 percent this year is “realistic.”

“Based on this new reality, the deficit goal they set for us will be established, and we are firmly committed to meeting it,” Montoro said. “What Spain advocates in Brussels is reaching stability in a realistic way.”

Spain won’t need to seek IMF help, nor will it tap the EU’s bailout funds to finance the overhaul of banks, Montoro said. The government, which increased income tax on Dec. 30 as part of 15 billion-euro ($19 billion) package of budget cuts, won’t raise value-added tax in the budget in March, he said.

--Editor: Dick Schumacher

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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