Brussels, 30/05/2012 (Agence Europe) - On Wednesday 30 May, the European Commission suggested to the ECOFIN Council that it give Spain until 2014 (rather than until 2013) to bring its deficit below the 3% of GDP cut-off point, although the Spanish authorities do not seem very enthusiastic about getting an extra year to meet their targets. The final decision will be made at an upcoming meeting of EU27 finance ministers.
As long as the Spanish government keeps regional government and quango spending down and submits a solid budget for 2013 and 2014, Rehn said (as he was unveiling the Commission's recommendations of each member state's budget and macroeconomic policies) that the Commission was prepared to consider extending until 2014 the deadline for Spain to correct its excess deficit.
Pointing out that Spain will need to make spending cuts of more than 1.5% of GDP in 2010-2013, Rehn justified the Commission's recommendation (which the president of the Commission, José Manuel Durão Barroso, said had been taken unanimously) on the grounds that Madrid was achieving its deficit reduction targets from a structural point of view (in other words, ignoring the impact of the current state of the economy - bank bailouts), as allowed by the Stability and Growth Pact. Spain is likely to be the only eurozone country in recession this year, added Rehn, rejecting suggestions that the Commission was making a special case for Spain. Rehn refused to answer a question about other countries being given extended deadlines, those in receipt of financial aid, for example, and those that had to make cuts to bring their deficit below the 3% cut-off point this year.
Rehn urged the Spanish government to take decisive action to deal with its banks and control regional spending, refusing to speculate on the best way to recapitalise Spanish building societies. It has not yet been decided exactly how the Spanish taxpayer is to bail out Bankia (to the tune of €23 billion). Rehn said public spending affects a country's deficit when a government does not act like a private investor in search of profit, but rather simply covers its losses. He admitted that the European bailout fund rules do not cover the payment of direct aid to a bank. (MB/transl.fl)