PP admits to mistakes in flexing budget muscles before Brussels’ say

The innate capacity of politics to transform defeats into victories is well known. But the speed with which the government has sought to turn a rebuke from Brussels into something positive has exceeded previous limits. In public, ministers and spokespeople are toeing the party line: the 5.3-percent deficit reduction cap achieved is considerably more than the original 4.4-percent target. But in private, the sensation is quiet distinct. Various members of the government consulted admit that the bar was set too high and that reduction goal was sold as something that had already been achieved.

Voices in the Popular Party have asked the same question that on Tuesday filled the corridors of Congress: was there a pre-arranged agreement between Brussels and Madrid? The resounding answer was no, there was no pact.

Mariano Rajoy has always worked on the assumption that the deficit target should be between 5.3 percent and 5.9 percent and he opted to plump for a high- end figure without any guarantee that even that would be reached. At the Brussels press conference, Rajoy appeared self-satisfied.

“It is a sovereign decision on the part of Spain. We didn’t say anything to anybody, neither was there any need to,” the prime minister said in a rare show of belligerence intended to promote an image of independence from the Commission.

But what happened on Tuesday, when Spain meekly accepted a further five-billion-euro cutback demand from Brussels without any negotiation shattered that image. Perhaps aware that he had been a touch too haughty in Belgium last week, Rajoy offered another press conference during which he said: “I neither make pacts nor am I breaking any. I do what I think is reasonable and later we will be evaluated. In April we will present our program [for a 5.8-percent target], in May there will be a negotiation and in June the European Commission will decide.”

But only a week after these words, Spain has had to swallow a five-billion-euro add-on. Now the government is trying to sell 5.3 percent as a good number, when a few days ago it stated that 5.8 percent “was pure common sense.”

“It is true that maybe we were too far away with 5.8 percent, and Brussels had wanted to make it clear that Spain cannot take unilateral decisions. But if we had gone for a target of 5.3 percent, would we have got it or would we have been reduced further still?” said a government source.

Those that insist no agreement was reached point to Finance Minister Cristóbal Montoro, who was forced to make swift changes to a speech on Monday on the deficit cap and to make hurried calculations to see if the extra 0.5 percent was feasible. When the numbers had been crunched, Brussels received its positive response.

But the internal debate has only just started: the cuts for 2012 now total 35 billion euros. Where will that figure come from? Montoro is fighting tooth and nail to avoid a VAT rise while a further wage slash for public sector workers has not been ruled out. The solution will be revealed on March 30, after the Andalusia elections.