Spain gets economic reprieve

BRUSSELS - Agence France-Presse

Spanish Finance Minister Luis De Guindos (L) and Euro group president Jean-Claude Juncker hug after a joke prior to a Eurozone meeting on March 12 in Brussels. AP photo

Spain wrung a major concession from the eurozone on March 12, winning leeway in its struggle to tame a runaway public deficit amid rampant unemployment.

After relentless austerity going back two years, but faced with renewed recession snagging the entire eurozone, the government in Madrid secured a substantial Brussels U-turn days after officials warned there would be no negotiation.

“The figure announced previously by the Spanish government... is dead,” said the head of the Eurogroup of finance ministers, Luxembourg Prime Minister Jean-Claude Juncker.

The sums involved are a big -”slippage” in Spain’s 2011 deficit, from a targeted 6.0 percent of gross domestic product (GDP) to the most recent estimate of 8.5 percent equated to some 90 billion euros ($120 billion).

That’s roughly the same as the entire bailouts given to Portugal or Ireland.

Diplomats have said Madrid blames its autonomous regional governments for overspending.

Spain was originally meant to bring its deficit down to 4.4 percent of GDP this year, but Spanish Prime Minister Mariano Rajoy said at a European Union summit last month that Madrid would instead aim for 5.8 percent of GDP.

However, finance ministers agreed to allow Spain to target 5.3 percent of GDP.

Stung by the Greek debt debacle, the EU had heavily flagged over the past year its efforts to tighten laws covering national borrowings.

Hungary, for instance, is set to be docked substantial monies on Tuesday under new oversight powers for Brussels, despite Budapest figures showing it fell officially within the EU limits last year, its target date.

But Spanish Finance Minister Luis De Guindos insisted: “There is no doubt about Spain’s commitment despite a complex, recessionary climate, not only in Spain but also in Europe.”

Austria’s hardline Finance Minister Maria Fekter had urged currency partners to adopt a “severe” attitude towards Spain, the eurozone’s fourth-biggest economy, in order to at least appear “serious.”