Brussels may give Spain another year on deficit goal

The European Commission is open to the idea of giving Spain another year to bring its public deficit back within the European Union ceiling of three percent providing it does its homework over the next two years, the EU commissioner for economic affairs, Olli Rehn, said Wednesday.

“On condition that Spain can effectively control the excessive spending, especially by the autonomous regions, and assuming that Spain will present a solid two-year budget plan for 2013 and 2014 [...] we are ready to consider proposing an extension of the deadline to correct the excessive deficit,” Rehn said.

Spain is currently set to reach the three-percent figure in 2013. The shortfall in 2011 was finally calculated at 8.9 percent, almost 3 percentage points higher than targeted. The government of Prime Minister Mariano Rajoy wants to trim the deficit to 5.3 percent of GDP this year.

Rehn said that the Commission would “present a more thorough assessment from our side over the course of the coming weeks.”

Brussels may also impose other conditions on Spain such as a hike in the value-added tax rate, and accelerating the phasing in of an increase in the retirement age to 67 years.

“There is a need to fully implement the ongoing reforms and substantially speed up reforms in the product and service markets,” the Commission said in a report.