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Rajoy Says Growth Is Goal as Spain’s 2012 Budget Deficit Narrows

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Feb. 27 (Bloomberg) -- Spanish Prime Minister Mariano Rajoy said his top priority is to return the euro region’s fourth-largest economy to growth after the budget deficit narrowed to 6.7 percent of output in 2012.

“The most important of Spain’s goals are economic growth and creating jobs,” Rajoy told lawmakers in Madrid today. Current economic policy including measures announced last week to spur financing for small businesses and reduce youth unemployment will enable the government to achieve them, he said.

The Bank of Spain said today the recession is extending into the first quarter after worsening in the final three months of 2012. Spain’s national statistics institute is due to release a breakdown of fourth-quarter gross domestic product tomorrow as the International Monetary Fund forecasts a deeper contraction this year.

Spain will notify the European Commission that its overspending narrowed to 6.7 percent of GDP last year, Rajoy said. Including European aid to recapitalize banks, the figure is 10.2 percent of GDP, the Commission estimated last week.

“There is no doubt this increases confidence in Spain,” Rajoy said. “What happened yesterday on the markets had nothing to do with Spain.”

The yield on Spain’s 10-year benchmark bond dropped five basis points after Rajoy spoke to 5.32 percent at 9:44 a.m. before paring the decline. It was at 5.36 percent at 11:05 a.m. in Madrid, up 19 basis points from Feb. 25, before the results of the Italian elections were known.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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