Op-ed: EU urges Spain to continue cutting back

Yesterday statement from Reuters caused a commotion between Spain and the EU. According to Reuters, sources from the EU suspect that the Spanish government could have exaggerated when they announced that the 2011 deficit will increase by 8% of the GDP with intentions of making their efforts to decrease the deficit and balance the 2012 budget look more significant than they actually were. The Spanish government immediately denied the allegation.

The Spanish government hastily published a figure that will be determined more precisely in several weeks when the 2012 national budget is finalized in hopes of easing pressure on the deficit reduction strategy. It has promised to reduce the budget until it is 4.4% of the GDP. Yet the economy continues to contract, making this difficult to achieve.

The situation reflects a tension between Spain and the EU in regard to budget forecasts for the current year. The Spanish government wants to decrease the rate at which it must decrease its national debt, but the EU, particularly Germany, would like a stricter adherence to prior agreements. Yesterday the EU urged Spain to approve its 2012 budget as soon as possible.

If there is any doubt about the suspicious that the EU could put up with, in its statement the EU also urged Spain to present its budget before the Andalusia elections are over. After take increases and financial and labor reforms, the message from the EU is clear: keep on going, and do not stop with the cutbacks. The EU is entirely correct. The Andalusia elections are no excuse.