Spain promises sharp budget cuts in bid to EU pension contribution requirement (Roundup)

Feb 3, 2010, 16:46 GMT

Madrid - The Spanish government on Wednesday shared with the European Union its plans to slash its budget deficit and bring it closer to eurozone standards, officials said Wednesday.

Presenting the savings plan to EU Commission officials in Brussels, Spain said it hopes to cut its budget deficit to 9.8 per cent of gross domestic product (GDP) this year, and down to 5.3 per cent of GDP by 2012.

Although the 9.8-per-cent figure is 1.6 per cent less than 2009's deficit, it is still three times higher than the deficit levels of 3 per cent of GDP allowed by eurozone policy, even if those standards are routinely ignored.

Spain expects to reach the 3-per-cent threshold in 2013, according to the plan.

However, new borrowing is expected to keep rising until it reaches a high point of 74.3 per cent of GDP by 2012. That would still mean Spanish borrowing was at a lower rate than in countries like Greece, Portugal and Italy, Spanish officials noted.

Also, the Spanish government retracted a part of its original statement in which it pledged to increase the number of years of pension contributions required for entitlement to retirement payments.

The Economics Ministry said those details were included in error and had only been meant as a hypothetical calculation, not a concrete proposal.

On Friday, government Prime Minister Jose Luis Rodriguez Zapatero agreed to some 50 billion euros (69.9 billion dollars) worth of savings by 2013.