European officials praised Spain’s 2012 budget measures and urged Prime Minister Mariano Rajoy’s government to implement them without delay.
“The unambiguous commitment of the Spanish government to the target of 3 percent fiscal deficit in 2013 is indeed of paramount importance,” European Union Economic and Monetary Commissioner Olli Rehn said in Copenhagen yesterday. “I expect this will be substantiated soon by a convincing path of fiscal consolidation” along with economic reforms to put Spain on a “more sustainable growth model.”
Spain, under threat of falling victim to the region’s debt crisis, pledged to raise taxes and slash spending to achieve 27 billion euros ($36 billion) in deficit cuts as it tries to trim its budget gap by a third.
“We will assess the budget proposal,” European Central Bank Executive Board member Joerg Asmussen told reporters in Copenhagen. “It’s preferable that new measures can be enacted as soon as possible, maybe through emergency legislation.”
The 2012 spending plan seeks to reduce the budget gap to 5.3 percent of gross domestic product from 8.5 percent in 2011, the largest reduction in at least three decades.
Spanish Economy Minister Luis de Guindos said the government is looking at shortening the parliamentary process necessary to approve the budget.
“Independently of what the ECB member says,” Spain will implement the measures “logically, as soon as possible,” de Guindos said in Copenhagen.
Rajoy riled EU partners on March 2 when he said he’d raised Spain’s deficit target to 5.8 percent of GDP from the 4.4 percent initially pledged. Earlier he had attended a ceremony to sign the fiscal pact treaty aimed at ending the debt crisis by enforcing budget discipline. EU allies pushed back and got Spain to agree on March 12 to a 5.3 percent goal.
“If we would have uncertainty growing due to the fact that people did not perceive that Spain was going in the right direction, that would have brought us back to where we were a couple of months ago,” Swedish Finance Minister Anders Borg said today before the second day of talks in Copenhagen. “So, I think it was crucial that they presented a budget that upholds the 3 percent target.”
The yield on Spain’s 10-year bond has risen more than 50 basis points since March 2 as a deepening economic slump compounded a bigger-than-forecast shortfall last year. The additional austerity measures announced today may fuel a second recession since 2009 that’s left the country with the euro-region’s highest jobless rate at more than 23 percent.