Spain lifts 2012 deficit goal to 5.8% of GDP - Government predicts growth to fall 1.7%, jobless atop 24% this year
2 March 2012, by Barbara Kollmeyer - Madrid (MarketWatch)
http://www.marketwatch.com/story/spain-lifts-2012-deficit-goal-to-58-2012-03-02Excerpt:With the ink barely dry on a new European Union treaty enshrining tougher budget rules, Spanish Prime Minister Mariano Rajoy said Friday the country would be targeting a higher deficit to GDP target for this year of 5.8%.
That’s well above the 4.4% target the prior government agreed with the European Union.
Speaking in Brussels at the conclusion of an EU summit, Spanish Prime Minister Mariano Rajoy said he had not informed his European counterparts because it was a “sovereign decision,” according to media reports.
He also said the limit respected European Union rules and the stability pact, those reports said, with Spain adding that it remains committed to hitting its target of cutting the deficit to 3% of GDP by 2013.
The Spanish media had been speculating for days that Spain would ask Brussels for a break on its budget target.
Economists have been warning the country could not drop the deficit from 8.5% last year to just over 4% this year, without strangling an already deeply depressed economy.
Earlier in the day, the government announced that
unemployment rose to 4.7 million persons in February,
a rise of 112,269 from the prior month.
Data released from Eurostat earlier this week revealed that Spain continues to hold the unenviable position of the
highest unemployment in the euro zone, at 23.3% for January. The government forecast Friday that unemployment would reach 24.4% this year.
The deficit announcement is likely to cause friction in Brussels, where EU leaders met to sign the new fiscal pact and discuss growth strategies.
The fiscal treaty, signed by leaders of 25 of the EU’s 27 nations, including Rajoy, aims to enshrine budget rules in member states’ constitutions.
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Spanish GDP fell 0.3% in the final quarter of 2011, the first fall in GDP since the fourth quarter of 2009.
The Bank of Spain recently forecast Spanish GDP would contract 1.5% in 2012,
and recuperate modestly in 2013, with growth of 0.2%.
The government predicted Friday that growth would fall 1.7%.
