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Spain hints could miss year-end deficit target

Treasury Minister Cristobal Montoro says focus shouldn't be on the magic figure of 6.3% of GDP but on reducing deficit

Reuters  |  Madrid 

Spain softened on Tuesday its insistence it would meet its year-end deficit target of 6.3% of Gross Domestic Product and said "good" reductions in spending by regional governments did not guarantee the objective would be achieved.

At a news conference in Madrid, Treasury Minister Cristobal Montoro declined twice to confirm Spain would meet the European Union-agreed target and instead referred to the European Commission forecast of a budget gap of 7.0% of economic output.

"The formal target remains the same and the European Commissioner for Economic and Monetary Affairs, when he assessed the measures taken by the government said Spain's deficit could be around 7% of GDP," Montoro said.

"What is really important is to reduce the deficit. The quicker the better but without deepening the recession. We shouldn't focus too much on this magic figure of 6.3% of GDP," he added.

Some analysts fear local finances and higher social security costs could push Spain over its 6.3% deficit target.

The central government has said it would not make an end-of-year review to adjust pensions to inflation since its deficit target was the top priority. On Sunday, Prime Minister Mariano Rajoy said the target would be hard to meet.

Minister Luis de Guindos said on Tuesday the was set in the last three months of 2012 to register its worst performance since the start of the current recession.

Spain's 17 autonomous regions had a public deficit of 0.93% of GDP at the end of September, compared to a year-end target of 1.5%, the treasury ministry said on Tuesday.

Stripped of extraordinary items, such as early transfers of funds from the central government, the figure came to 1.14% of GDP, the ministry said.

"Do these good figures guarantee the 1.5% target will be met? No, there is no guarantee. We should not relax," Montoro said, adding the progress made showed the target was feasible.

Seven regions, including Catalonia or Andalucia are not on track to meet their year-end target. The central government has a target of 4.5% of GDP, including the cost of funding the social security system.

Its deficit was 4.13% of GDP in the January-October period but that does not include the social security system, which is set to register a deficit of 1% of GDP according to a document sent to the European Commission in October.

 

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First Published: Wed, December 05 2012. 02:06 IST
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