Spain remains on track to tame blowout in state finances

Spain met its deficit-reduction target for last year as a better-than-expected performance by the central government compensated for the regions' failure to reach the goal they had been set.

Economy Minister Elena Salgado said Tuesday the shortfall in the books of all of the public administrations narrowed to 9.2 percent of GDP from 11.1 percent in 2009. The government had set itself a target of 9.3 percent of GDP.

Salgado told a news conference that Spain had shaved some 20 billion euros off its deficit last year as a result of the government's austerity drive, which is aimed at convincing the markets of the country's creditworthiness.

The central government's deficit came in at 4.97 percent of GDP, compared with a forecast of 5.9 percent and a figure of 9.4 percent in 2009. That performance was undermined by the regions, which booked a shortfall in their finances of 3.39 percent of GDP, compared with the target set for them by the government of 3.1 percent.

Salgado said failing regions would be urged to act with the "maximum firmness possible" to ensure their finances are sustainable.

About half of the 17 regions did their homework, including Madrid, Extremadura, the Basque Country, Castilla y León, the Canary Islands, Cantabria, Galicia and Asturias. Andalusia was a borderline case, while those falling "notably" short of the target included Aragon, Navarra, La Rioja and Valencia.

The worst culprits were Catalonia, the Balearic Islands, Murcia and Castilla-La Mancha, which fell "considerably" short of the goal. Castilla-La Mancha was the bottom of the class, with a deficit of 6.47 percent.

Local administrations posted a deficit of 0.64 percent of GDP, slightly above their goal of 0.6 percent, while the shortfall of the Social Security System was 0.24 percent. Spain is aiming to narrow its deficit further this year to 6.0 percent of GDP.