Spain steps up budget row with EC

THE SPANISH government has stepped up its appeal for leniency from the European Commission (EC), arguing its budget deficit will only miss targets because of the recession, not a lack of action by the government.

Prime Minister Mariano Rajoy, elected last year after pledging draconian spending cuts, is now lobbying Brussels arguing the deteriorating economy makes it impossible to cut spending by more than €40bn (£33.39bn) this year to reach a deficit target of 4.4 per cent of gross domestic product.

Tough spending cuts and recent economic reforms all show a commitment to fiscal stability and Spain will be on track to hit the ultimate goal which is a deficit of three per cent of GDP in 2013, a government source said.

Madrid said this week that its 2011 budget deficit was 8.5 per cent of GDP, 2.5 percentage points above a six per cent target, putting the 2012 goal almost certainly out of reach.

However, foreign minister Jose Manuel Garcia Margallo said in a television interview yesterday that Spain does not expect Brussels to relax the deficit target by more than a few decimal points.

Rajoy plans to present his completed budget on 30 March despite pressure from Brussels to finish it sooner.