Spain receives a one-year extension to correct the excessive deficit, having until 2012 to reduce it to 3%
| Date: March 24, 2009 | Source: Economic @ 21 |
| Category: Economy | |
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Loading ... The European Commission has granted this morning to Spain an extra year, until 2012, to correct its excessive deficit, maximizing the flexibility allowed by the Stability and Growth Pact (SGP) in times of recession, according to sources familiar with the case. So far, both the financial vice-president, Pedro Solbes, and the Economic Affairs Commissioner Joaquin Almunia, had announced that the deadline to return below the threshold of 3% would be 2011.
The Government will also have only six months to explain to the EU what action it will take to correct the excessive deficit in time. The EU executive Solbes requested to apply strictly the rate of correction of the deficit projected in the last update of the Spanish stability program submitted in January.
This is the second phase of the excessive deficit procedure launched against Spain Brussels on 18 February. Spain's deficit stood at 3.8% of GDP in 2008, up 3% authorizing the Pact Stability and Growth Pact (SGP) and shoot up 6.2% this year due to falling tax revenues, increased unemployment benefits and stimulus measures to combat the crisis, according to forecasts by Brussels. In 2010 will decline slightly to 5.7%.
The finance ministers of the EU and have asked Spain to avoid taking new economic stimulus measures that aggravate the budget deficit and return to fiscal consolidation from 2010. The Ecofin Council also criticized the Spanish stability program does not specify the measures to be taken to reduce the deficit in 2010 and 2011, beyond the end of the fund to help municipalities approved in 2008.
Normally, the deadline for correcting the deficit would be one year, but the extraordinary economic situation that the Commission will make a flexible interpretation of the SGP and give up to four years in Spain to return below 3%.
The Spanish stability program projects a deficit of 5.8% this year to drop to 4.8% in 2010 and 3.8% in 2011. Although Brussels has already qualified figures overly optimistic, asked the Government to make every effort to meet these objectives.
The finance ministers of the EU debate and approve the recommendations and deadlines to correct its excessive deficit in Spain during the informal meeting held in Prague on 3 and 4 April.
Along with Spain, the Commission shall submit recommendations on Tuesday and deadlines for France, Ireland and Greece, countries that also opened last month excessive deficit procedure. The deadlines for correcting the deficit will differ from country to country depending on your point of departure and the specific economic situation.
The EU executive also will issue further advice to the United Kingdom, which is in the excessive deficit from last year but from which no progress can be made in the disciplinary proceedings because it belongs to the eurozone.
