EC denies Spain sanction threat over reported fudge of deficit data

The European commissioner for economic affairs, Olli Rehn, on Tuesday described suspicions that Spain is not doing enough to cut its deficit as “pure speculation.”

Rehn was responding to a report on Tuesday by Reuters that Europe suspects Spain is dragging its feet on implementing further measures to reduce the deficit ahead of the elections next month in Andalusia. Opinion polls point to a first-ever victory for the PP over the Socialists in the region. Reuters quoted one official as saying it is “likely” Brussels will sanction Madrid.

Rehn said reports of punishing Spain were “incorrect and misleading.” However, he struggled to dispel doubts about whether the government may have deliberately inflated the public deficit last year in order to make its target for this year look better.

The commissioner confined himself to saying that at the end of last year the incoming Popular Party government identified a significant deviation in the public deficit but took rapid action to limit it.

He said it was “premature” to accuse Spain of deception in the deficit figures for last year before official data is available. “We have no reason to doubt the quality of the data Spain provides,” he said.

In the face of the commissioner’s somewhat lukewarm defense of Spain’s honor, his spokesman Amadeu Altafaj felt obliged to say: “I categorically deny that the Commission harbors any doubt about the Spanish deficit figures.”

Shortly after the PP took office in December, a number of government officials said the outgoing Socialist government had overshot its deficit target for last year of 6 percent of GDP by a full two percentage points.

The government used this argument to justify a 15-billion-euro austerity package. The official deficit target for 2012 is 4.4 percent of GDP, but Spain would like Europe to cut it some slack on this.

Rehn on Tuesday seemed to rule that out as he urged the government to “move quickly in the preparation of the 2012 budget in order to meet fiscal targets for this year.”

“When it comes to deficit reduction in 2012, the Spanish authorities have clearly stated their commitment to restoring sustainable public finances,” Rehn added. “We expect the Spanish government to substantiate the measures recently announced.”