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Spain Will Miss Budget-Deficit Goals Through 2013, EU Forecasts

May 11, 2012

Spain will miss its budget-deficit target this year and rack up a shortfall that is more than double its goal in 2013 as unemployment exceeds 25 percent, the European Commission said.

Spain’s overall budget deficit will amount to 6.4 percent of gross domestic product this year and 6.3 percent in 2013, missing the targets of 5.3 percent and 3 percent respectively, the Commission said in its spring forecasts today in Brussels. It sees the economy contracting 0.3 percent in 2013, a more pessimistic view than the government’s, pushing unemployment to 25.1 percent.

Spain is implementing the deepest austerity measures in at least three decades including tax increases and savings in health and education. Concerns over Spain’s deficit and the government’s ability to overhaul lenders without overburdening public finances have helped reignite the sovereign debt crisis, sending Spanish 10-year borrowing costs to more than 6 percent.

The Commission said that slippage would come from regional governments, which control health and education and hire about half of the nation’s public workers. The forecasts are based on a “no-policy-change assumption,” and not all consolidation measures for the regions have been specified yet, it said in the report. The social security system, which makes up part of the overall budget, may post a deficit amid rising unemployment, it said.

Spain’s budget deficit was 8.5 percent of GDP last year, more than the 6 percent target, mainly due to overspending by the regional governments. Prime Minister Mariano Rajoy, who came to power in December, said this week the government is committed to its targets and the government should focus on meeting the goal rather than getting a looser one.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at

To contact the editor responsible for this story: Craig Stirling at

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