Spain Pushes Through Budget With EU Forecasting Deficit Breaches

  • Commission says Spain will miss deficit target in 2015, 2016
  • Spain missed deficit goal two years out of three under Rajoy

The Spanish government approved its budget for 2016 without addressing calls from the European Commission to revise the plan to ensure the country meets its deficit target.

After three months of debate, Prime Minister Mariano Rajoy used his party’s absolute majority in parliament to push through the spending plan that aims to persuade voters to give him a second term in December’s general election.

Rajoy’s fiscal policy has come under intense scrutiny this month as officials in Brussels said the government’s growth forecasts were too optimistic and questioned the country’s ability to bring its deficit down to the agreed limit.

The Commission sees Spain’s budget shortfall coming in at 3.5 percent of gross domestic product in 2016 -- missing the 2.8-percent target and leaving the fourth-largest euro-area economy in breach of the bloc’s 3 percent deficit ceiling for a ninth straight year. Spain will also miss this year’s target of 4.2 percent by 0.3 percentage points, the commission said.

The government sees the Spanish economy growing 3.3 percent this year and 3 percent in 2016 while the commission expects 2.8 percent and 2.6 percent. Under Rajoy, Spain has missed its deficit goal in two of his three full years in office.

Despite the criticism, the Spanish government has insisted that the country can comply with its obligations without further cuts. Economy Minister Luis de Guindos and Budget Minister Cristobal Montoro both argued that potential deviations would be offset by faster job creation and rising tax revenue.

The leader of the PP party in parliament Rafael Hernando, went further in his defense of the budget, arguing that European Economic Affairs Commissioner Pierre Moscovici, formerly finance minister in France under the Socialist Francois Hollande, was motivated by his political affiliations in his criticisms of the Spanish government.

In a post published on his website, Moscovici said claims like Hernando’s were “false” and lacking seriousness.

“Some tried to politicize this issue, not me,” he wrote. “This goes beyond me as it calls into question the credibility of the European Commission and our common rules.”

With unemployment still at 22 percent after the country’s five-year slump, Rajoy has vowed to create three million new jobs if he is re-elected on Dec. 20. The prime minister is facing competition from the Socialists, running at a virtual tie in polls, and new parties, including Podemos and pro-business Ciudadanos. Polls show no party is likely to win an overall majority.

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