Spain admits it may not meet deficit target

Jan 20, 2012, 12:05 GMT

Madrid - Spain's conservative government on Friday admitted it may not meet its target of slashing the budget deficit to 4.4 per cent of gross domestic product this year, as had been agreed with the European Union.

The plan of cutting the deficit to 4.4 per cent from an estimated 8 per cent in 2011 was based on 'outdated' growth forecasts, Finance Minister Cristobal Montoro told Financial Times Deutschland.

The previous Socialist government, which was ousted in the November elections, had expected a 2.3-per cent growth for this year.

The International Monetary Fund, however, said in a draft report that it expected Spain's economy to contract by 1.7 per cent in 2012 and by 0.3 per cent in 2013.

The government nevertheless maintained its engagement of cutting the deficit to 4.4 per cent this year, Finance Ministry sources said following the publication of the interview.

Prime Minister Mariano Rajoy's government has adopted tough austerity policies in an attempt to restore market confidence in Spain's solvency. It has announced an initial package of spending cuts and tax hikes worth 15 billion euros (19.5 billion dollars), and more is expected to follow.