Spain is hurtling towards an embarrassing test case and possible big fine under new EU rules for a "grave" breach of budget limits, the European Commission says. The overshoot amounts to scores of billions of euros, and led analysts to warn that leaders may have signed away more sovereignty to Brussels than intended during the debt crisis and that the onset of recession risks derailing the implementation of new EU rules. "We need to shed full light on what went on Spain in 2011," EU Economy Commissioner Olli Rehn's spokesman Amadeu Altafaj said on Monday of what he called a "serious, grave" gap in the figures. Advertisement: Story continues below Altafaj said Madrid notified Brussels on December 30 that it had overshot its 2011 deficit target by two percentage points, then two days ago that it was another half a percentage point higher. Spain's 2011 public deficit was supposed to come in at six per cent of gross domestic product (GDP) but ended up at 8.5 per cent, meaning the state spent 90 billion euros ($111 billion) more than it took in last year. As a result, Prime Minister Mariano Rajoy said on Friday last week Madrid could not hope to close such a huge gap to meet the 2012 target amid soaring unemployment and a deepening recession. He did so hours after he and 24 other leaders signed a much-heralded EU treaty supposed to end EU states piling on debt. "The heat of the crisis meant that EU leaders may have signed off more sovereignty than they have prepared their electorates for," said Sony Kapoor, head of economic consultancy Re-Define. "Now the backpedalling has begun." Blaming over-optimistic forecasts by his Socialist predecessors, Rajoy said Spain's public deficit would now reach 5.8 per cent of output in 2012, nearly twice the EU limit and well above the 4.4 per cent level previously agreed with Brussels. The difference would represent a sum not far short of the 90 billion euros for 2011 - not dissimilar to the size of the entire bailout agreed on for neighbouring Portugal. Altafaj said Rehn already asked Spain for "clarity" during talks among eurozone finance ministers last on Thursday and is still waiting. "It's clear we need these hard figures, validated, in order to do a full assessment," he said. As a eurozone state, Spain risks a cash fine worth between 0.2 per cent and 0.5 per cent of GDP depending on the severity of the circumstances under new laws meant to tighten budgetary discipline that came into force at the start of the year. There is a growing likelihood that the European Commission will order Spain to maintain preset targets, with one key source saying top Brussels officials, awaiting April budget submissions, are "of a mind to negotiate nothing and simply open infringement proceedings". "Once we have clarity," Altafaj said of the detailed figures and analysis wanted in Brussels, "we will do our analysis and make our recommendations." Rajoy, though, already argued on Friday his new 5.8 per cent goal was a "sensible" position to adopt, and two senior EU diplomats have suggested Madrid could be allowed to postpone some of the toughest decisions on cuts to 2013. One of these diplomats said to expect Madrid to slash its deficit from 8.5 per cent of GDP to 4.4 per cent as planned in one year would be "a rather steep reduction - probably simply not possible". This source said Spain had indicated the problem lay with its autonomous governments, such as Catalonia or the Basque Country. However, he also noted "an underlying issue is that you shouldn't have different rules for small and bigger countries". Eurozone and EU finance ministers are due to discuss Hungary's slippage next week. Missed targets there resulted last month in a recommendation by Rehn that 500 million euros in EU grants should be suspended next year unless corrective action is taken.
You Might Also Like :
0 comments:
Post a Comment