Brussels, 11/05/2012 (Agence Europe) - At the end of May, the European Commission will announce whether new austerity measures need to be taken by Spain so that it can meet its excess deficit reduction targets (5.3% in 2012 and 3% in 2013), said Euro Commissioner Olli Rehn on Friday 11 May as he unveiled the Commission's Spring Economic Forecasts (see separate article). The Commission says that with current policies, Spain's deficit will reach 6.4% of GDP in 2012 and 6.3% in 2013. Spain is likely to be the only EU member state in recession next year, when its economy is expected to shrink by 0.3% of GDP after contracting by 1.8% this year. Unemployment is expected to rise in Spain from 22.8% in Q311.
Olli Rehn said he was fully confident in the Spanish government's ability to meet its budget commitments under the Stability and Growth Pact. The Commission's forecasts do not yet include measures by the Spanish regions under the new budget law on which Brussels is expecting to be provided with information later this month. Rehn said that tough action would be needed to clean up Spanish banks, suffering under the burden of more than €180bn of toxic mortgage lending and negative equity. On Friday, the Spanish government introduced new bank rules to partially privatise Bankia, requiring banks to separate off toxic assets on their balance sheets and make further emergency provisions of some €30bn. The new law was greeted by a fall on the Madrid Stock Exchange, but was welcomed by the president of the European Council, Herman Van Rompuy, who said it was an important step in restoring confidence. (SP/MB/transl.fl)