European Union Economic and Monetary Commissioner Olli Rehn will announce today whether Spain has done enough to bring its budget deficit under control, an EU official said.
Spain in July was given three months to take “effective action” by cutting the structural deficit by 2.7 percentage points in 2012 and 2.5 points in 2013. The EU said on Nov. 7 that the Spanish government would fail to meet its overall deficit targets through 2014, when the budget shortfall is forecast to be more than double the bloc’s limit.
Rehn will render his verdict in a statement at 4:15 p.m. in Brussels.
Spanish Prime Minister Mariano Rajoy already is implementing the deepest budget cuts on record, reducing spending on health, education and jobless benefits, while increasing sales tax and levies on income. Even so, fiscal consolidation “hardly advanced in the first eight months of 2012,’’ the EU said on Nov. 7, as the economy continues to shrink, pushing the unemployment rate to 26 percent.
Opposition to Rajoy’s cuts is growing while those measures are failing to rein in the deficit or bring down borrowing costs. Spanish workers today staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts.
Demands for less austerity are gaining traction as the International Monetary Fund recommends nations including Spain slow the pace of budget cuts. In Spain, unions said most auto and metal workers joined the strike.
Spain’s budget gap will amount to 6.4 percent of gross domestic product in 2014, compared with a target set by the EU of 2.8 percent, the European Commission said on Nov. 7. It predicted budget shortfalls of 8 percent this year and 6 percent in 2013, up from May forecasts of 6.4 percent and 6.3 percent, respectively.
Spain’s IBEX 35 increased 0.6 percent and the euro traded higher against the dollar after Rehn’s office said the commissioner planned a statement on Spain this afternoon without giving more detail on the topic. The European currency, which has declined more than 6 percent in the past year, was 0.3 percent higher on the day at $1.2738 at 3:55 p.m. in Brussels.
At a meeting of European finance ministers in Brussels yesterday, Rehn said a proposal on Spain will be presented “shortly.” The country is “working hard” to meet its fiscal targets, he said.
“Spain is in the process of substantiating its fiscal consolidation measures in the next two years,” Rehn told reporters at the Brussels meeting. “We will focus on the structural sustainability of public finances over the medium term. That means structural effort, not only the nominal target.”
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