Lagarde Says Spain Needs More Time to Bring Down Budget Deficit

Christine Lagarde, managing director of the International Monetary Fund, said Spain needs more time to reduce its budget deficit as the economy labors with record unemployment.

Spain “clearly needed to do fiscal consolidation, but we do not see a need to do upfront, heavy-duty fiscal consolidation as was initially planned,” Lagarde said at a press conference in Washington today. The country “needs more time.”

The IMF this week marked down its forecast for the Spanish economy by 0.1 percentage points, forecasting a 1.6 percent contraction for this year. Spain last year overshot the deficit goal imposed by the European Union by more than 50 percent after recapitalizing its banks and is pushing EU officials to increase its 4.5 percent target for this year.

Prime Minister Mariano Rajoy said last month he expects to cut his economic forecast. The government, which has predicted a 0.5 percent contraction in 2013, will publish its medium-term fiscal projections on April 26.

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