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EU lets Spain slide on deficit targets

Nov. 14, 2012 at 7:43 PM   |   Comments

BRUSSELS, Nov. 14 (UPI) -- The head of the European Commission said Spain will not need to rein in spending or raise taxes until at least 2014, despite ongoing debt problems.

The Financial Times reported Wednesday that EU Economic Commissioner Olli Rehn announced that Spain did not need to adjust its budget, even though it is likely the government will miss deficit targets this year.

"We are not so much focused on the nominal targets, even though they often make easier headlines because they are exact percentages," Rehn said.

As members of the European Commission were agreeing to excuse Spain from further austerity measures, union groups demonstrated in both Spain and Portugal Wednesday, protesting further government cutbacks, the Times said.

While letting Spain off the hook, Rehn said the European Commission would "look at every country case by case." It was not a policy shift to allow countries to slide on deficit targets, he said.

Spain has been at the center of the debate concerning its need to borrow funds to bail out its banks, but a reluctance to have the government borrow the money directly, which would add onto its debt burden, thereby putting it further away from meeting deficit targets.

In comparison, the Greek government has gone through a series of painful austerity budget plans with the cutbacks often viewed as reducing support for the Greek economy.

Some analysts say the international bailout funds provided Greece pushes Athens further away from meeting deficit targets and undermines the economy, making more bailouts necessary.

Specifically in Spain, cuts in pension system will now be spared, the Times said.

Spain was expected to reduce its deficit to 6.3 percent of the country's gross domestic product by the end of 2012 and to 4.5 percent by the end of 2013.

"We have now concluded for 2012 and 2013, Spain has taken effective action," Rehn said.

"The box is ticked as long as implementation is solid and convincing," he said.

Topics: Olli Rehn
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