Bloomberg News

Spain Central Government Deficit Widens on Regional Transfers

June 26, 2012

Spain’s central-government budget deficit widened in the first five months of the year, approaching its full-year target, as the state brought forward payments to cash-strapped regional administrations.

The central government, which is aiming for a deficit of 3.5 percent of gross domestic product this year, had a shortfall of 3.41 percent through May, compared with 2.59 percent a year earlier. Excluding the impact of regional transfers, the deficit narrowed to 2.38 percent from 2.56 percent, the Budget Ministry said in a statement today in Madrid.

Spain missed its deficit goal last year by almost 50 percent mainly because regional governments failed to cut spending enough and tax revenue slumped. In the first quarter of this year, regions balanced their budgets even as the economy contracted, helped by transfers from the government, Budget Minister Cristobal Montoro said on June 1.

“The deficit has started on a downward path and we expect that to intensify,” Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid. “We are determined to meet the budget target.”

The central government shortfall is set to be the largest component of the overall public-sector deficit, which is targeted at 5.3 percent of GDP this year. It was 8.9 percent in 2011, the third-largest in the euro area, according to the last estimate, which the government made after discovering bills left unpaid by regional administrations.

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

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


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