Deficit last year well over two points above target

Spain overshot its deficit-reduction target by 2.5 percentage points last year, strengthening the administration’s argument that Brussels should soften the agreed goal for this year. The figures presented by Finance Minister Cristóbal Montoro on Monday showed the shortfall in the government’s finances in 2011 came to 8.51 percent of GDP, well over the target of 6 percent, and above the estimate of 8 percent given by the Popular Party (PP) government in December.

The central administration’s deficit last year was only 0.3 percentage points above its target of 4.8 percent of GDP, while the Social Security system booked a slight shortfall of 0.09 percent of GDP when it was expected to post a surplus of 0.4 percent. The main culprit was the regions, whose combined deficit of 2.94 percent of GDP was more than double the target of 1.3 percent.

Shortly after raising the alarm about the deficit, the government announced a budget savings package of 15 billion euros. The deficit target for this year of 4.4 percent of GDP will require the administration to make further budget savings of over 25 billion euros amid another recession.

Earlier this month, the European commissioner for economic affairs, Olli Rehn, urged the Rajoy government to push ahead with drawing up this year’s budget. Reuters at the time quoted unnamed EC officials as saying the PP may have inflated the deficit for 2011 and that it was delaying unveiling the budget because of Andalusian regional elections on March 25. The PP denied those allegations.