EU says Spanish deficit will drop 4.4% this year

While Greece, Hungary and Portugal are burdened by the fact that their respective governments falsified national debt figures in order to diminish their severity, yesterday doubts were sowed about whether the new Spanish government inflated its deficit percentages in order to make itself look good for solving a problem that was inherently not as grave as it first appeared.

Mariano wants to look carefully at Spain's budget and economic figures as the EU demands that Spain meet a 4.4% budget/GDP ratio by the end of 2012 and speed up its budget approval process. Rajoy is trying to delay the final 2012 budget until after March elections in Andalusia.

The controversy unraveled yesterday morning when Reuters published that the EU might be so angry at the new Spanish government that it could impose a multi-million-euro fine for Spain inflating national deficit figures and postponing unpopular budget adjustments and reforms until after the Andalusia elections.

Battle of wills between Spain and EU

The Zapatero government promised the EU that Spain's deficit would close the 2011 fiscal year at 6% of the nation's annual GDP, drop to 4.4% by the end of 2012 and to 3% in 2013. But then the government let the cat out of the bag and revealed that the deficit was actually greater than 8% in 2011.

Sources consulted by elEconomista, without confirming or refuting the information that Reuters published, interpreted the information as a symptom of current tough bargaining between the EU and Spain. The European Commission finished its economic forecasts that it will present next week, although the complete and consolidated report of the forecasts will not but publicized until spring. Spain wants to leverage its collapsed economy and exacerbated debt situation, which should figure into such predictions, to slow down the pace that it must pay down its national debt and avoid having to reduce it to 4.4% of the GDP by the end of this year.