“MADRID—Spain’s new government said the country will miss its budget-deficit target by a wide margin, and announced spending cuts and tax increases of about €15 billion ($19.4 billion) to stem the tide of red ink.
One week after conservative Prime Minister Mariano Rajoy took his o
ath of office, his government said Spain’s budget deficit will be about 8% of gross domestic product in 2011—well above the 6% target the previous government of Socialist Prime Minister José Luis Rodríguez Zapatero committed to with the European Union and financial markets.
The overrun makes Spain the latest country on the euro zone’s fiscally frail periphery to stumble in attempts to close a yawning budget gap. Portugal, Italy and Greece have all been forced to push through austerity measures in recent months.
On Friday, Madrid proposed about €8.9 billion in spending cuts for 2012 that ranged from trimming public-sector employment to curbing subsidies for political parties.
The government also went back on a campaign pledge of Mr. Rajoy’s and approved tax increases of about €6 billion. The total budget adjustment represents about 1.5% of GDP.
“We weren’t in favor of tax hikes,” government spokeswoman Soraya Sáenz de Santamaría said at a news conference. “They were forced by the size of the [budget] gap we encountered.”
Spain’s latest measures will likely be insufficient to slash the budget deficit from 8% of GDP in 2011 to the target of 4.4% in 2012, a gap of about €36 billion. The government will present a new 2012 budget in March.
Ms. Sáenz de Santamaría hinted more austerity measures will come. “The government has started to take measures; this is the beginning of the beginning,” she said…”
If you enjoy the content at iBankCoin, please follow us on Twitter
