Rajoy talks of "unpleasant" measures to fulfil deficit-reduction commitment

With less than a week to go before he takes office, incoming Prime Minister Mariano Rajoy is still refusing to discuss his plans for the Spanish economy. Pressed by journalists following a get-together with King Juan Carlos on Thursday, and ahead of his meeting with outgoing premier José Luis Rodríguez Zapatero on Friday, Rajoy would only say that he was committed to reducing Spain's deficit to 4.4 percent of GDP by the end of next year.

"We are going to meet our public deficit objectives; our commitment to the European Union," he said would be his first priority. "On that basis we will set growth forecasts, because the current figure of 2.3 percent will not be met this year. We also have to set a spending limit, and we will have to take decisions. Some of them will be unpleasant, as those taken by the regional government of Catalonia. But Spain's electorate knows that we have to take that kind of decision," he said in reference to the 10 percent spending cuts announced by Catalonia's right-wing CiU administration.

"I do not wish to say anything about my government's policies ahead of my investiture," he said. Rajoy added that the situation in Spain was "very difficult" and also highlighted the need for the country to find the route to economic growth and job creation for Spain's unemployed. Rajoy will be sworn into power on December 21 after a two-day investiture debate.

Rajoy's comments came after the European Central Bank questioned whether Spain will be able to meet its commitments to reduce the country's deficit this year to 6 percent of GDP and meet its target of 4.4 percent for next year.

"The risk of slippages in relation to the objective of reducing the general government deficit to 6 percent of GDP this year has increased in recent months owing to weakness in tax receipts," the ECB said in its latest monthly report released Thursday. "The incoming government will need to formulate a convincing 2012 budget in line with budget targets as soon as possible. This should be based on a prudent forecast for economic growth and tax receipts, which is also necessary to ensure that regional government budgets for 2012 are based on realistic revenue assumptions."

"My intention is to do what I said I would do, "Rajoy went on to say. "If I am unable to do so, I will explain why. I do not know yet what the deficit will be for this year. If the deficit is 6 percent, that means spending cuts of 16 billion euros next year. For every extra percentage point, that means cutting a further 10 billion. But until we have the full macro picture, I am not going to take a decision," insisted Rajoy. "We will meet the demands required by the deficit. From now on we will make every effort, but I am not going to predict events," he said.

Rajoy has supported the reform of EU treaties that would give Brussels effective control of the economies of the single currency, saying last week that he hopes measures will be carried out "swiftly."