Deficit may be lower than estimate of 6.7 percent of GDP: minister

Finance Minister Cristóbal Montoro on Wednesday said if there is a revision to Spain’s estimated public deficit last year of 6.7 percent of GDP, the final figure is likely to be lower.

In an interview with state broadcaster TVE, the minister said the final budget execution figures for local corporations are not yet available and suggested they may turn out more positive than the initial estimate of a shortfall of 0.2 percent of GDP, a tenth of a point less than targeted.

The regions managed to lower their deficit from 3.3 percent of GDP in 2011 to 1.7 percent last year, 0.2 points above target, while the central government trimmed its shortfall from 5.1 percent to 3.8 percent, 0.7 points better than expected. The sector most to blame for Spain missing its overall target was the Social Security system, which saw its deficit widen from 0.07 percent of GDP in 2011 to almost one percent last year when it was expected to be in balance.

Montoro expressed satisfaction with the outcome of the government’s austerity drive despite the fact the state missed the target of 6.3 percent agreed with the European Commission, noting that the shortfall had been considerably reduced from the 8.9 percent of GDP posted in 2011. However, including the European bailout to recapitalize the country’s banks, the deficit was just shy of 10 percent of GDP.

He lamented the impact on the public of the government’s belt-tightening measures which included tax hikes and wage cuts in the public sector. “It fell to me to [pursue] a policy that I don’t like.”

The minister was also confident the European Union’s statistics office would confirm the government’s figures. “Eurostat has never corrected Spain’s deficit figures, not with this government or any other,” he said.

Spain is waiting to know if Brussels will concede it more time to bring its deficit back within the EU ceiling of three percent. The government is committed to doing so by 2014, but it seems impossible that it will be in a position to do so by then.