Spain plans to cut its government deficit this year and next at a slower pace than originally agreed with the European Commission as it struggles to bring its public debt in line with Brussels' demand
Spain says it wants cut its government deficit this year and next at a slower pace than originally agreed with the European Commission.
The new budget plan.. will allow us to reduce the deficit without putting the pace of growth at risk
That comes after it badly missed deficit reduction targets for 2015 leading to a big budget gap.
Spain is now hoping to bring the deficit below the required 3.0 percent of gross domestic product by next year.
Brussels has yet to agree to that.
The European Commission, along with the European Central Bank, warned that Madrid is falling behind on the necessary reforms to rebalance the economy amid political stalemate after inconclusive elections last December.
The government wants to whittle down the deficit to 3.6 percent of economic output in 2016 from a previous target of 2.8 percent, which would have met the 3.0 percent threshold recommended by the European Commission.
It projects that goal will now only be reached in 2017, with a deficit at 2.9 percent of GDP instead of the 1.4 percent previously forecast.
The caretaker centre-right government said sticking to the original targets could hurt an economic recovery.
“It would have required a very significant budget adjustment,” acting Economy Minister Luis de Guindos told parliament.
He confirmed Spain was lowering its annual growth forecasts for 2016 to 2.7 percent from 3.0 percent previously, and citing a slowdown in the world economy.
“The new budget plan is in line with the situation we had at the end of 2015 and will allow us to reduce the deficit without putting the pace of growth at risk,” he said.
In spite of spending cuts by the previous People’s Party administration and a rebound over the past two years after a prolonged recession, Spain has struggled to bring its public deficit in line with Brussels’ demands.
Tax cuts brought in months before the December election partly contributed to a wide deficit miss last year.
Spanish regions, which manage their own budgets in areas such as education and healthcare, also overspent, driving the deficit to 5.0 percent of gross domestic product rather than the 4.2 percent target agreed with the European Commission.