MADRID: Spain has staked its financial survival on cutting its bulging deficit, but analysts warn it will miss its key 2012 target, undermined by the very measures taken to try and meet it.
Prime Minister Mariano Rajoy has promised Spain’s European neighbours to cut the public deficit — the shortfall of revenues to spending — to 6.3 percent of output in 2012, after they let him relax an earlier 5.3 percent goal. But a recession aggravated by budget tightening and widening holes in the finances of Spain’s big-spending regional governments have undermined his promise, as warnings have increased that Spain will need a full bailout.
“Nobody now believes it will be able to fulfill the target,” said Alberto Roldan, an analyst at Spanish brokerage Inverseguros.
Another economist, Jesus Castillo of Natixis bank, estimated the deficit this year will be between 7.5 and eight percent. An overshoot of the 6.3 percent goal “is in all the forecasts,” he said.
Spain, the fourth biggest economy in the eurozone, massively overshot last year, with spending outweighing revenues by 8.9 percent of gross domestic product against an initial target of 6 percent. Under pressure from European authorities, Rajoy’s government has made the deficit its top priority and has tried to lower it through unpopular savings measures including cuts to pay and benefits, and a sales tax rise.
AFP
