Bank of Spain Governor Miguel Angel Fernandez Ordonez says meeting deficit targets will be “tremendously arduous” amid the recession in the euro area’s fourth-largest economy.
“The task of consolidation implicit in these fiscal targets is turning out to be tremendously arduous,” said Ordonez during a hearing in Spain’s senate, referring to Spain’s commitment with the European Union to reduce its budget shortfall to 5.3 percent of gross domestic product this year and 3 percent next year.
The difference between Spanish and German sovereign borrowing costs surged to a euro-era record today, 5.27 percentage points for 10-year bonds. The Spanish yield jumped 17 basis points to 6.62 percent.
“The uncertainty surrounding the macroeconomic situation is very high,” Ordonez said, citing the risk that tax receipts come in lower than forecast and that spending is higher than planned. More spending cuts and tax raises, including permanent ones, may be necessary, Ordonez said.
“It is not exaggerated to say that Spain’s future is at stake mainly in the fulfilling of fiscal targets and that the failure of the consolidation process would postpone the possibility of an economic recovery,” he said.