Spain To Get an Extra Year to Achieve Budget Goal

  on Jul 09,2012 Posted in Featured ,International
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European Union finance ministers are set to meet and decide about the grant package for Spain to extend the timetable until 2014 for them to reach a deficit target of 3 percent of GDP.

One of the Diplomats said that Spain’s budget consolidation targets will be adjusted to give them an extra year, which is not a unilateral move. Spain needs to make the necessary cuts to reach that goal and this will be discussed on Tuesday at the Ecofin (meeting of ministers).

Two other European Union diplomats said that Spain would be given a year to reach its budget deficit targets in return for taking extra savings measures.

Under the budget rules of the EU, Spain had been due to reduce its national budget deficit to 3 percent of GDP by the end of year 2013. But a strong recession has made that a challenging target for Spain.

Spain’s economy minister will further detail the budget savings to his peers, while paving the way for Europe to grant the euro zone’s fourth-largest economy with an extra year to reach its deficit targets.

No final decision is expected at a Eurogroup meeting of euro zone finance ministers for a bailout package of Spain’s banks. A big gathering of EU finance chiefs is set to meet on Tuesday to ease a debt goal that has pressured Madrid to make cuts that are worsening a recession.

According to a source close to the Spanish government, 10 billion euros of cuts would come this year and that will be achieved by the  measures of a reduced social security payments, reduced unemployment benefits, VAT hike and changes to pensions calculations.

In return to these measures,  Madrid will be given until 2014 to reach the strict goals laid down in EU budget rules.



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