Deficit triples at the start of year as budget debate kicks off

Amid an animated debate in Congress Tuesday on the Popular Party government’s draconian draft state budget for this year, Finance Minister Cristóbal Montoro revealed that the deficit had widened in the first quarter of 2012, arguing that this justified the government’s drastic spending cuts and tax hikes.

Montoro’s ministry later said the shortfall had tripled in the period to 1.85 percent of GDP. According to Montoro, in homogenous terms the figure was 0.83 percent.

In a heated exchange, the finance minister and the leader of the opposition Socialist Party, Alfredo Pérez Rubalcaba, swapped accusations of “deceit” over last year’s budget deficit.

On taking power in December of last year the PP said it was shocked to find the deficit was eight percent of GDP rather than the six-percent target the government had set. The final figure was 8.5 percent of GDP.

Rubalcaba, who was interior minister in the outgoing Socialist government, insisted the PP was aware of the figure. “You knew the deficit figure from the moment you took power; nobody deceived you,” he charged.

The draft budget includes savings of 27 billion euros as part of an austerity drive that seeks to reduce the deficit to 5.3 percent of GDP this year. The government has also announced cuts in education and health spending — areas that are the responsibility of the regions, the main culprits for the blowout in the budget last year.

Acknowledging that the budget “has rightly been called the most austere” since the return to democracy, Montoro said that achieving the deficit target for this year is a “commitment that cannot be abjured.”

Montoro said the central government “would not hesitate” to take over the reins of the regional budgets if they failed to achieve the targets set for them.

Focusing on the education and health cuts, Rubalcaba accused the government of xenophobia over its decision to deprive 150,000 immigrants without papers of the right to healthcare.

Montoro cited the poisoned “inheritance” left by the Socialists. “You have taken this country to the limit,” he said.