Brussels, 12/03/2012 (Agence Europe) - On Monday 12 March 2012, the Spanish economy minister briefed the other eurozone finance ministers on the overshoot of public spending in Spain in 2011 to explain why it happened (a deficit of 8.5% of GDP rather than the planned 6%) and what will be done to deal with the situation. Describing Spain as a loyal EU member, Spanish economy minister Luis De Guindos brushed aside doubts about the Spanish governments deficit targets (4.4% in 2012 and 3% in 2013) in an interview with Spanish newspaper ABC on Sunday.
At the Spring European Summit, Spanish Prime Minister Mariano Rajoy announced that his conservative government had decided unilaterally to pursue a lesser objective than previously planned in 2012 (5.8%) because the economic recession is biting harder than expected. The country has not changed the timing for returning to below the Stability and Growth Pact cut-off point (3%) in 2013 (see EUROPE 10566). Rajoy said that too much austerity would be counterproductive. The Spanish government has already made cuts of €15 billion and a further €15 billion will be required to meet the new 5.8% target, €10 bn less than to meet the previous target, 4.4%.
Rajoy's announcement took Eurogroup by surprise on the day it was due to sign the new budget pact on budget discipline. The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, were reportedly informed in advance. EU Euro Commissioner Olli Rehn was furious because he regularly asserts that the Stability and Growth Pact will be applied to the letter and has been putting pressure on Belgium and Hungaryto introduce corrective measures to ensure they meet their budget targets. The Danish Presidency says it is problematic for credibility. Before reacting to the news (some time in April), Rehn wants the Spanish government to shed light on the ins and outs of the country's finances and to submit a draft budget, along with corrective measures, by the end of the month. The draft budget is likely to impose spending cuts on the Spanish regions, but will not be unveiled until after the elections in Andalucia, where the conservative party (Partido Popular) is expected to win by a landslide. (MB/transl.fl)