EU Sticks to April Budget Deadline for Spain Despite Gridlock

  • Spain set to miss its 2016 budget deficit target, EU forecasts
  • Party leaders struggling to form government after election

Spain has to submit plans to get its budget back on track by the end of April, European Commissioner Pierre Moscovici said Wednesday. The country will probably still be without a government by then.

Party leaders have been trying to piece together a governing majority since December’s inconclusive election result and have until May 2 to find a solution before a fresh ballot is triggered.

But Spanish officials needs to set out their plans for correcting the budget shortfall in the country’s 2016 stability program, due two days before that parliamentary deadline, Moscovici said Wednesday in a statement on the commission’s website. Failure to address the commission’s concerns could be used to justify starting sanctioning procedures.

The country is set to post a budget deficit of 3.6 percent of gross domestic product this year, compared with its 2.8 percent target, according to the commission’s forecasts.

Spain has been under the European Union’s excessive deficit procedure since 2009 after the bursting of a decade-long real estate bubble put a hole in the government’s finances. Acting Prime Minister Mariano Rajoy missed his deficit target every year since taking office, including 2015, when the economy grew at the fastest pace since 2007 and the European Central Bank’s government-bond purchasing program cut its financing costs to record lows.

Mixed Messages

The commission has been sending out mixed messages on Spain’s deficit. On Tuesday, Moscovici said that the commission would have to wait for Spain to settle its political impasse before it could take action on the deficit while Acting Economy Minister Luis de Guindos said he expected officials in Brussels to understand the limits on a caretaker government following a meeting with his EU counterparts.

“An acting government can’t take additional measures,” de Guindos said. “The government can do what it can do as an acting government and I don’t think that Brussels will ask it to go further.”

The Socialist Party and its liberal ally Ciudadanos, who are seeking support to lead the next government, are pushing for the commission to relax Spain’s targets.

“This is a very serious warning that shows that Rajoy’s government has little credibility,” said Manuel de la Rocha, the Socialist Party’s head of economic policy. “A new government is needed to negotiate a new path to reduce the budget deficit.”

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