Rajoy assures EC Spain will stick with 2013 deficit target objective

Spanish Prime Minister Mariano Rajoy on Monday reaffirmed his country’s commitment to bringing down the deficit to three percent of GDP by the end of 2013, keeping Spain’s pledge to Brussels in its second target goal.

The prime minister made his remarks as European economy ministers were meeting in Brussels to find out why Spain reneged on its promise to meet a 2012 objective of bringing the deficit down from 8.5 percent at the end of last year to 4.4 percent of GDP. Rajoy surprised Brussels during the last EU summit by announcing that his government will only bring the deficit down to 5.8 percent of GDP this year amid the prospect of a return to recession.

“Spain wants to fulfill its European commitments, which we have taken voluntarily, and thus our actions will be in line with the recommendations to Spain from the [EU ministers] council in 2009 and from the Commission,” Rajoy said on Monday.

Before the Brussels meeting, an EC official told Reuters that Spain was going to be the “subject of serious discussion.” Another official added: “They will have to be questioned, I think there are no real reasons for missing the target this year.”

Saying that Spain should not be allowed to go back on its initial deficit-reduction pledge, Austrian Finance Minister Maria Fekter stressed that Madrid “must make efforts” to meet the original target. Dutch economy chief Jan Kees de Jager also called for “firmness” with Spain.

But Jean-Claude Juncker, chairman of the Eurogroup, said Spain should stick to its 2013 objective but left the 2012 figure open for debate. “We assume that Spain will and wants to meet its deficit target for 2013,” said Juncker, who is also the prime minister of Luxembourg. “We’ll talk about the concrete measures that have to be taken,” referring to the country’s budget.

A difficult budget for difficult times” was promised by Rajoy

The Cabinet is expected to finally approve the 2012 budget on March 30, which will contain 12-percent reductions in government spending at the ministries, Rajoy said.

Without discussing figures, Rajoy described it as being “a difficult budget for difficult times.” The long-awaited budget will be approved just five days after the important elections in Andalusia, where the Popular Party (PP) is expected to win in a region governed by the Socialists for three decades.

The prime minister — who made his remarks during the presentation of a 35-billion-euro fund that will go to pay suppliers owed money by cash-strapped regional and municipal governments — also announced that besides a leaner budget the government will “at the same time” have to “make important decisions.”

“This is going to be a parliamentary term filled with reforms,” he said, mentioning that changes will be made in education, energy, justice and public services.

The Organization for Co-operation and Economic Development said on Monday that it has seen “positive changes” in major European economies, including Spain. But euro-zone officials fear that by allowing Spain to soften its deficit target other countries may follow suit, potentially undermining the EU’s strict budget rules. But nations such as Belgium, Portugal and the Netherlands have all said that they will stick with their own objectives.

Economy Minister Luis de Guindos said that Spain’s efforts to rein in spending have been praised by the Commission and that the country was going to compensate for what happened last year, when Spain posted a deficit 2.5 percentage points higher than expected, by introducing “structural adjustments.” After De Guindos had met with German counterpart Wolfgang Schäuble, the Berlin official told reporters that “Spain has made great progress.”

In the last few weeks, Rajoy has been making calls to German Chancellor Angela Merkel and French President Nicolas Sarkozy to canvas their support in allowing Spain some leeway on the deficit this year. Last week EC auditors traveled to Spain to look at the country’s accounts over a two-day period.