Spain is not yet the new Greece but it is raising some eyebrows in Brussels. Mariano Rajoy’s new government has admitted it will miss a deficit goal agreed in the new fiscal pact to which Spain is a signatory.
Madrid is hoping to avoid being penalised as it thinks Brussels will recognise the efforts it is making to confront its problems.
Spain’s target deficit this year will be 5.8 percent of GDP as opposed to the agreed 4.4.
Its economy is predicted to shrink by 1.7 percent and unemployment has gone up to 24 percent – the highest in the EU.
The problems are crystallised in Peleas de Abajo, Spain’s most indebted village. The town hall has borrowed around 5m euros – about 20,000 euros per resident.
Villager Emilio Rivera said:
“The debt’s been there for years and to sort it out now is impossible. If we can’t get the government to help us out of this crisis it will be impossible.
We didn’t do anything about it until now because we didn’t realise how much debt we were in.”
The government has introduced labour reforms and made severe cuts. But Brussels is worried that Spain’s gamble with its deficit will undermine the credibility of the euro zone fiscal pact before it even gets off the ground.