Brussels ratifies report warning Spain over deficit target risks

The European Commission has warned that Spain will not be able to meet its deficit reduction goals for this year and next, and has called on the government to amend its 2016 budget accordingly after the general election.

“The commission foresees that Spain’s overall deficit would fall to 4.5% of GDP for this year, and for 3.55% in 2016, which would represent a failure to correct the excess before the end of 2016,” the EC said in a statement yesterday, after finally ratifying its controversial report on the Spanish budget,.

It added that it regarded the Spanish government’s own growth forecasts as “optimistic”. The government of Prime Minister Mariano Rajoy has predicted 3.3% growth for this year, while Brussels says the figure will be 3.1%.

Responding to the EC, Rajoy said late on Monday that Spain would meet its deficit obligations: “I don’t agree [with the commission]. Spain is going to comply with the deficit reduction,” he said in New York, ahead of a meeting of the UN Security Council.

The Prime Minister pointed out that the IMF had included Spain among the countries whose economies were currently growing the most. The IMF has said the bloc will grow by 1.5% overall for this year, while Spain’s economy will expand by 3.1%.

Brussels added that whichever government emerges after the December 20th elections would have to revise the current plan to meet the goal of reducing the deficit to 2.8% for next year.

In this way the EC judgment softens the original view of the EU commissioner for economic and financial affairs Pierre Moscovici’s team.

Whereas that report had given Spain a severe dressing down, the ratified version maintains the figures but frees Rajoy from having to make any budget changes now – it leaves it up to the new government to implement the necessary alterations.

Brussels said its opinion was a warning, and nothing more, with Moscovici describing Madrid’s plans as “plausible” and close to its own.

About Richard Lawson

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