Guindos Says Spain to Defy EU Request to Revise 2016 Budget

  • Spain asked by EU to revise spending proposals for next year
  • EU says nation risks breaching deficit goals in 2015, 2016

Spain is sticking to its guns after the European Commission criticized its budget and asked for a new version.

Spanish Economy Minister Luis de Guindos said the government won’t make any changes to its spending plans. He insisted the country will hit its 4.2 percent deficit target for this year and will bring the shortfall below the euro-area ceiling of 3 percent with the 2016 budget.

“We aren’t going to change it because we believe we will hit the target perfectly,” De Guindos told reporters in Madrid late Tuesday. “I’m convinced we will meet this year’s goal, and this will pave the way for us to comply with our objective of cutting our public deficit below 3 percent” in 2016.

His comments echoed those of Prime Minister Mariano Rajoy who argued the Commission is underestimating the strength of the Spanish economic recovery. Earlier in the day, Rajoy reiterated that the country is on track to meet its budget-deficit target next year, citing faster job creation and tax collection.

The Brussels-based Commission said Spain’s budget shortfall will be 3.5 percent of gross domestic product next year -- missing the government’s 2.8 percent target and leaving the fourth-largest euro-area economy in breach of the bloc’s 3 percent deficit ceiling. Spain will miss this year’s target of 4.2 percent by 0.3 percentage point, the Commission said.

“Brussels, among other things, has indicated that our projections are feasible but there are some risks of breaching the deficit, this is nothing new,” De Guindos said. “Time has always proved us right. Spain will comply with the 4.2 percent deficit goal.”

The Commission’s analysis is a blow for the Spanish government with just weeks to go before a general election. Hit by a number of corruption scandals and the legacy of austerity, Rajoy is betting the economy will see him through, presenting himself as the only candidate who can safeguard the recovery.

Officials from Rajoy’s People’s Party rallied round their leader and questioned the Commission’s math. Budget Minister Cristobal Montoro said the government’s tax cuts had helped inject 3 billion euros ($3.4 billion) into the economy.

Montoro said such moves would help increase tax revenue, “making it possible” for the government to achieve its deficit goals, not the opposite.

The leader of the PP delegation in the Spanish Parliament, Rafael Hernando, went even further, criticizing European Economic Affairs Commissioner Pierre Moscovici for being imprudent. Hernando said that Moscovici, formerly French finance minister under Francois Hollande, was “carried away by his Socialist affiliations” in his assessment of the Spanish economy, El Pais reported.

The Spanish budget is due to be approved next week by the parliament in Madrid.

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