Alarm is sounded over the country's borrowing, with the chance of the public deficit being cut from 9% to 6% said to be slim
Alarm bells are being rung over Spain's ability to hit its public deficit target this year without taking further dramatic steps to raise extra income or cut spending.
Figures released last week by the national statistics institute (INE) show that the deficit level remained virtually unchanged during the first half of this year, according to one of the country's leading analysts.
Angel Laborda, of the savings banks federation Funcas, said the figures on the overall borrowing needs of Spain's public administration meant the chances of bringing the deficit down from 9% to 6% this year were slim.
The deficit could now head for between 7.5 and 8%of GDP ? well off the target agreed by the socialist government of prime minister Jos� Luis Rodr�guez Zapatero and the European Union and much worse than previous analysts' estimates.
"Most of the year has already gone so I think it is impossible to meet 6%," Laborda said. "I'd say it will be closer to 8%."
He blamed the problem on the regional governments, who account for a third of public spending. Many had only seriously begun to cut spending after May elections, he said. Lower-than-expected growth was also a handicap.
Separate figures show that central government has brought down its part of the deficit, suggesting that regional governments may have actually grown their deficits during the first half of the year, he said.
The Zapatero government has staked its credibility in the markets on hitting deficit targets. The fact that it met last year's target, together with Spain's relatively low overall national debt, helps to explain why bond yields have been lower than neighbouring Italy's.
Finance minister Elena Salgado has repeatedly vowed to meet this year's 6% target. The socialist government, which is set to be replaced by the conservative People's Party (PP) at a general election on 20 November, has said it will introduce new measures if it has to.
"Our objective of a 6% deficit at year's end will not be given up on," a finance ministry spokesman reaffirmed. "We have said many times that we will do whatever it takes to meet that."
The PP has also pledged to meet deficit targets. The spokesman blamed a change in INE's metholodogy for Laborda's calculations. Laborda denied that there was a problem, saying INE had also presented its data on previous years using the new methodology.
The average predicted deficit figure from 18 of Spain's top analysts prior to last week's figures was 6.5% for 2011.
Source: http://www.guardian.co.uk/business/2011/oct/10/spain-deficit-target-zapatero-debt
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