Brussels sends team to inspect Spain's state finances

The European Commission on Friday confirmed that it had sent a team of inspectors to Madrid to examine the situation of the Spanish state’s finances last year when the public deficit came in at 8.5 percent of GDP, 2.5 points above target.

The Popular Party government of Prime Minister Mariano Rajoy surprised Brussels last week by announcing a deficit target for this year of 5.8 percent, arguing that the earlier agreed goal of 4.4 percent with the Commission was not feasible because the economy was heading for another recession.

“A mission of commission experts for economic affairs met, or rather went to Spain this week in order to hold an expert group meeting on the situation of the public accounts,” spokesman for the European commissioner for economic and monetary affairs, Amadeu Altafaj, told reporters in Brussels.

Altafaj described the mission as “part of our ongoing bilateral contacts with member states on technical matters” and denied it in any way reflected distrust of the Rajoy government.

Reuters had reported that EC officials questioned whether the government had inflated the figure for last year in order to make its target for this year look better, something the Rajoy administration vehemently denied, blaming the blowout on the outgoing Socialist government.

“We have no reason to doubt the figures supplied by Spain,” Altafaj said. “What we need is to establish clarification on the figures,” he said. “[The mission] has not been brought about as a result of our doubts, let’s say, as to the veracity of the Spanish figures.”

Earlier this week, Altafaj said that once Brussels had examined Spain’s budget plans for this year, it would decide whether or not to make recommendations under Article 126 of the EU Treaty, which deals with sanctions for countries with excess deficits. This could mean a fine equivalent to 0.2 percent of GDP.

Commission President José Durão Barroso has said Brussels will not relax the deficit target agreed with Madrid until it knows the reasons for the 2011 overshoot; whether this is the result of one-off or structural factors.

Spain’s budget situation is likely to be discussed at a meeting of euro-zone finance ministers due to be held March 12-13.

The government has said it will need to find budget savings of 37.9 billion euros this year to meet the 5.8-percent target. This includes spending cuts and tax hikes worth 15 billion announced at the end of last year.

The government set a spending ceiling that is 4.7 percent down on last year, with the budget for the country’s ministries set at 12.5 percent less.

The economy is expected to shrink 1.7 percent this year.