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23 February 2012

FT: Madrid presses EU to ease deficit targets


Spain is pressing the European Commission to ease the country's strict budget deficit target for this year, arguing that the European Union executive's own pessimism about the Spanish economy shows the potential risks of too much austerity.

Advisers to Mariano Rajoy, the centre-right Spanish prime minister elected in November, are asking the Commission to accept that a contracting economy makes a target agreed by the previous government of limiting the national budget deficit to 4.4 per cent of GDP this year unrealistic and even counterproductive. They want a new target above 5 per cent of GDP. “There are conversations under way”, said one Madrid official. “This year will be a hard year for Spain and we must all be aware of this”, Mr Rajoy said on a trip to Rome. “Serious governments cannot think about the short term, but about the medium and long term to create employment.”

The previous Spanish government of José Luis Rodríguez Zapatero, Socialist prime minister, had agreed with its European partners to cut the national budget deficit to 6 per cent of GDP in 2011. But Mr Rajoy has disclosed figures showing that the 2011 deficit in fact exceeded 8 per cent of GDP. European Commission officials have indicated Mr Rehn is likely to send a letter to Mr Rajoy after the Spanish government presents its delayed 2012 budget next month, but Mr Rehn would only say that he would review the new budget figures once they are provided by Madrid in March and validated by the EU’s statistical agency in April.

Full article (FT subscription required)



© Financial Times


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