Spain to miss budget
SPAIN, mired in political deadlock just as it emerges from a six-year recession, has admitted it will overshoot its 2017 budget deficit target.
The finance ministry said it informed the European Commission that it provisionally forecast its budget deficit at 3.6 percent of gross domestic product (GDP) from a previous 3.1pc target.
It noted a backdrop of political instability after two inconclusive elections inside a year and eight years trying to haul itself back into shape following the 2008 economic crisis.
Two months ago, Madrid just avoided an EU fine for repeated breaches of budget rules.
Brussels let both Spain and neighbouring Portugal off the hook, judging that both were trying to get their house in order and close in on the official ceiling of 3.0 percent of GDP.
But the EU told both countries to stay on a path of “fiscal consolidation” as the only way to create a foundation for durable growth.
Brussels did not immediately comment on the latest forecast for the eurozone’s fourth-largest economy.
After six years in recession, Spain reported a 2015 budget deficit of 5.1pc of GDP, way off the 4.2pc target set by the Commission.
For this year, Madrid must pare the deficit to 4.6pc, and then 3.1pc in 2017 – which it will now miss – then 2.2pc in 2018.
The budget report recognises that government plans to bolster revenue, including tax hikes for companies which it hopes can net 8 billion euros (US$9 billion), will not suffice.
Growth is also fraying with the government now forecasting 2.9pc for this year – down from 3.2pc. The government is sticking with the prediction of 2.3pc for 2017. –