Spain Raises 2014 Spending Limit, Takes Steps to Boost Revenue

Spain’s Cabinet approved a higher spending limit for 2014 and tax changes to boost revenue as its seeks to curb the widest European Union budget deficit without jeopardizing an exit from a sixth year of economic slump.

The spending limit for 2014 will be 133.3 billion euros ($174 billion), 2.7 percent higher than a year earlier, Budget Minister Cristobal Montoro told reporters in Madrid today. Stripping out the contributions to the state-funded pensions system and unemployment benefits, the spending ceiling would have fallen 1.3 percent from 2013, he said.

European Union finance ministers this month granted Spain two more years, until 2016, to tackle its budget deficit after it received EU loans to bail out its banking sector last year. Prime Minister Mariano Rajoy is counting on exports to lead a recovery this year after the fourth-largest economy in the euro region has contracted seven straight quarters.

The EU has set Spain’s deficit target for 2013 at 6.5 percent of gross domestic product after overspending reached 10.6 percent last year. That is more than three times the EU limit of 3 percent of GDP.

Spain will raise taxes on tobacco and alcohol and will also impose a levy on air-conditioning gases, Montoro said, adding the impact of the steps announced today would be revenue this year of about 1 billion euros. Spain will also remove some corporate tax deductions, he said.

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