Brussels keeps close tabs on Spain's accounts

The European Commission is stepping up its vigilance of Spain's national accounts after the massive overshoot in its budget deficit target last year and the government's attempt to set a goal for this year that was not to Brussels' liking, according to European Union diplomatic and Spanish administration sources.

The shortfall in the government's books hit 8.5 percent of GDP last year, 2.5 points above target. The government of Prime Minister Mariano Rajoy set an objective for this year of 5.8 percent against a previous goal agreed with Brussels of 4.4 percent as a "sovereign" decision. However, after a Eurogroup meeting this month, Spain found itself obliged to accept the EC's figure of 5.3 percent, despite the fact the country is heading for a renewed recession, with GDP forecast to contract 1.5 percent.

The sources said that Spain's partners will examine each of the steps taken by the Rajoy government at EU and Eurogroup meetings, with the country's problems high on the agenda.

Spain's risk premium has widened once more since Rajoy's unilateral ploy on the deficit target, with the approaching recession and the ongoing fallout of the property crash on the banks also pushing it back above that of Italy.

"Spain has left Italy behind and is on the front line of fire," an EU source said. "Market suspicions have returned and hence the need to increase the political pressure so that the Spanish government and the regions comply with all of their commitments and avoid seeing sanction procedures opened against them, and in the ultimate instance to avoid opening another chapter in the euro crisis."