Spain narrows central govt budget deficit to 4.39pc
Spain’s central government budget deficit narrowed in September as a sales-tax increase buoyed government revenue, boosting Prime Minister Mariano Rajoy’s campaign to resist asking for a sovereign bailout.
The central government’s deficit was 4.39 percent of gross domestic product in the nine months through September, compared with 4.77 percent in the eight months through August. Value- added tax receipts surged 11.9 percent in September from a year earlier as an increase came into effect, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid.
Prime Minister Mariano Rajoy, whose popularity has slumped as budget cuts deepen the recession while failing to tame borrowing costs, said yesterday he would trigger the bailout mechanism when it was in Spaniards’ best interests, and such a move isn’t “indispensable” at the moment. “All these developments and read-outs allow us to be optimistic about reaching our budget objectives,” Curras said. “The central government deficit is under control.”
Even as the government says the central government’s balance is within target, Rajoy is struggling to control regional spending and a swelling social-security shortfall. The prime minister, seeking to deliver on his European commitment of limiting the overall public sector deficit to 6.3 percent of GDP this year, is facing mounting pressure to trigger the European Central Bank’s bond-buying program by signing up to a European rescue package.
The government needs to raise 60 billion euros ($78 billion) in debt and equity to fund a bad bank that it announced this week and Curras said the administration also is weighing a bailout for toll-road operators that are struggling to meet repayments on 4 billion euros of project loans.
The state already bailed out banks, the power industry, the regions and the construction industry, twice, as private sector losses tumble onto the government’s books amid the country’s worst financial crisis in more than half a century.
Even so, the central government’s 2012 deficit will be smaller than officials forecast as austerity measures kick in during the final quarter boosting revenue, Curras said. She said that the state’s deficit will be less than 4 percent of gross domestic product, offsetting any deviation from the projected shortfall in the socialsecurity system.
Spain’s economy contracted for a fifth quarter between July and September as unemployed rose to a record 25 percent adding extra payments for those out of work. Gamesa Corp. Tecnologica SA (GAM) and Iberdrola SA (IBE) announced they are cutting 3,800 jobs as they battle falling power demand in Spain and a slump in exports of wind turbines.