BRUSSELS: The European Commission ordered Spain to submit a new draft budget with lower deficit estimates to avoid violating the bloc’s tough spending rules, in a blow for the government ahead of Spanish elections.
The official warning from Brussels comes ahead of Spain’s December 20 general election, in which the economy is expected to be a key issue for the conservative government of Prime Minister Mariano Rajoy.
The Commission, the EU’s executive arm, said that Spain’s draft budget for 2016 was “at risk of non-compliance” with rules brought in following the global financial crisis, adding that it “invites the national authorities to present an updated draft budgetary plan.”
It added: “The Commission expects Spain’s headline budgetary deficit to decrease to 4.5 per cent this year and to 3.5 per cent of GDP in 2016, not meeting the target for Spain to correct the excessive deficit by 2016.”
The EU limit for deficits is 3.0 per cent of gross domestic product.
Valdis Dombrovskis, EU vice president for the euro, said that Spain had made a “remarkable” turnaround from the crisis but that Madrid “has to stay the course of reforms and responsible fiscal policy.”
EU Economics Affairs Commissioner Pierre Moscovici had last week already chided Spain over its budget plans, warning Madrid that it would have to take additional measures to keep its deficit below 3.0 per cent of output in 2016 as agreed.
Spanish Economy Minister Luis de Guindos struck back on Sunday, telling journalists that the government’s forecasts “in recent years” have been more accurate than those made by Brussels and the International Monetary Fund.
“The Spanish economy has recovered with an intensity that we did not predict,” he added at the IMF’s annual meeting in Lima, Peru.
“I am convinced that Spain will meets its target of a deficit of 4.2 per cent this year, and that this will mean that next year we will have a public deficit below 3.0 per cent,” he said.
Blindsided by the debt crisis, Spain implemented unprecedented austerity measures to reduce its budget deficit which sparked noisy street protests and caused its support to slump. — AFP