Bloomberg News

Spain Budget Data Show EU Must Ease Goals, Economist Says

January 04, 2013

Budget data on Spain’s regions puts additional pressure on the European Union to ease the country’s deficit targets for a third time in less than a year, economist Carmen Lopez Herrera said.

“The target is too demanding, it is very probable that it’ll be relaxed this year,” Lopez, who works for Madrid-based consulting company Analistas Financieros Internacionales, said in a telephone interview. “As it is, a target of 1.5 percent of output was difficult to reach for the regions in 2012, so 0.7 percent in 2013 is even further out of reach.”

The European Commission is due to decide in February whether to recommend giving Spain more time to tackle a deficit that was as large as Greece’s in 2011. The nation’s economy, the fourth-largest in the euro area, may contract for a second year in 2013. EU leaders already loosened Spain’s budget goals twice last year as a recession extended through the region.

Data released yesterday by the Budget Ministry show eight of Spain’s 17 semi-autonomous regions including three of the four biggest contributors to its economy aren’t on target. Deputy Budget Minister Marta Fernandez Curras said Dec. 21 the nation will struggle to meet its goal of 6.3 percent of output set by the EU.

Slow Implementation

“If Spain’s 2012 deficit is around the levels forecast by the European Commission, it will review this year’s goal and this time the regions will be given more leeway,” Lopez said, adding that such a loosening of conditions is unlikely should the shortfall be particularly serious.

The regions are struggling to reorder their finances as spending cuts in public services such as health care and education, the bulk of their expenditure, are slow to implement, while tax receipts and revenue from asset sales are lower than expected, she said.

Prime Minister Mariano Rajoy asked the regions to cut their combined shortfall by more than half last year after it rose to 3.3 percent of gross domestic product in 2011. Their overspending was the main reason for Spain’s missing its overall target of 6 percent of gross domestic product, coming in instead at 9.4 percent of GDP, the second-largest deficit in the euro region.

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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