Unlikely To Achieve The Deficit Target Of Spain

The alarm bells are rung on the ability of Spain to govern its public deficit target this year without more dramatic action to generate additional revenue or cut spending.

Figures released last week by the National Institute of Statistics (INE) show that the level of the deficit remains unchanged during the first half of this year, according to a leading analyst of the nation.

Angel Laborda, savings banks Funcas federation, said that the figures on the total borrowing requirement in government in Spain means that the chances of reducing the deficit from 9% to 6% this year were slim.

The deficit is now at the head of between 7.5 and 8% of GDP - and off-target, the Socialist Prime Minister Jose Luis Rodriguez Zapatero, and the European Union, and much worse than previous estimates of analysts'.

"Most of the year is already gone so I think it is impossible to reach 6%," said Laborde. "I would say it would be closer to 8%."

He blamed the problem of regional governments, which account for one third of public spending. Many of them had just begun to seriously cut spending after the May elections, he said. Weaker than expected growth was negative.

Separate figures show that the state has reduced its share of the deficit, suggesting that regional governments may have actually increased their deficit in the first half of the year, he said.

The Zapatero government has staked its credibility on the markets to achieve deficit targets. He met the target of last year, with Spain the debt relatively low national total, helps explain why bond yields were lower around Italy.

The Finance Minister Elena Salgado has promised several times to reach the target by 6% this year. The Socialist government, which is set to be replaced by the conservative Popular Party (PP) in the parliamentary elections on November 20, has announced it will introduce new measures if it should.

"Our goal is a deficit of 6% at the end of the year did not surrender," a spokesman of the Ministry of Finance has confirmed. "We have said many times that we do everything to achieve this."

PP has promised to meet the deficit targets. The spokesman accused the INE to change metholodogy calculations Laborde. Laborde has denied the problem, said the INE was also presented data from previous years with the new method.

The average forecast deficit figure of 18 of the best analysts of Spain to the figures last week was 6.5% in 2011.