BRUSSELS (MNI) – The European Commission on Tuesday warned that
bending fiscal rules for Spain, the Eurozone’s fourth largest economy,
which yesterday announced a higher-than-expected budget deficit for
2011, could damage the credibility of Europe’s crisis response.
“We are not talking about giving any flexibility to current rules,”
said a spokesman for the Commission. “We need to think about the
credibility of our response”, he said adding that EU countries had
recently been “gaining credibility with market because we are
implementing the rules.”
Under new economic governance rules in place since December,
Eurozone governments should face near automatic sanctions for failing to
stick to agreed deficit reduction targets.
The Belgian government earlier this year was forced to make last
minute changes to its budget to avoid falling foul of the rules in the
light of lowered growth expectations, but the challenges facing Spain
are more daunting.
Ultimately Eurozone governments could decide to give Spain some
flexibility on its targets but “we are not there yet,” the spokesman
said, acknowledging that the country’s targets were “already a challenge
for the Spanish government, economy and people”.
Spain is supposed to bring its budget deficit down to the EU limit
of 3% of GDP by 2013, under targets agreed with the Commission and
Eurozone governments, but the country’s chances of meeting that goal now
look distant as the government announced that last year’s budget deficit
was 8.5%, little better than in 2010.
The Commission spokesman declined to comment on the poor figures,
saying that it had yet to receive them formally and that it would hold
discussions with Spanish authorities to understand the reasons behind
the data.
Spain’s government is expected to produce a draft budget for 2012
in March and the Commission would work with the government, the
spokesman said.
–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com
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