European Union Economic and Monetary Commissioner Olli Rehn urged Spain to spell out how it will cut the budget deficit in 2012 after missing last year’s goals.
“When it comes to deficit reduction in 2012, the Spanish authorities have clearly stated their commitment to restoring sustainable public finances,” Rehn told reporters today in Strasbourg, France. “We expect the Spanish government to substantiate the measures announced recently.”
Rehn said the EU wants Spain to “move quickly in the preparation of the 2012 budget in order to meet fiscal targets for this year” and prepare for 2013.
Spain had the euro area’s fourth-largest budget deficit in 2010 and failed to meet the target set by the EU in 2011. Prime Minister Mariano Rajoy now has to nearly halve the shortfall in one year to get the nation back on track while fighting a second recession in two years.
Media reports that the EU is considering sanctions against Spain are “incorrect and misleading,” Rehn said.
Rajoy, whose People’s Party government took over from the Socialists in December, has said he’ll present a budget for 2012 after the EU’s growth forecast for Spain is released on Feb. 23. He has increased taxes and reduced public spending to cut the deficit by 15 billion euros ($20 billion).
Moody’s Investors Service yesterday said it is “skeptical” the nation can trim the gap to 4.4 percent of gross domestic product as pledged by Rajoy. Moody’s said it expects the general government budget deficit to remain between 5.5 percent and 6 percent this year.
The adjustment Spain is faced with is “unprecedented” Moody’s said, estimating the deficit must be reduced by around 40 billion euros.