Moody's expect regions to miss deficit target

 

According to Moody's, inaction by Spanish regions' look set to force the central government to take further measures to ensure the country meets its deficit-reduction target for the year.

Spain's Minister for the Economy, Elena Salgado, confirmed last week that the regions held a combined deficit of 13.06 billion euros, equivalent to 1.2% of GDP, for the year to date, when their target for the full year is 1.3%. Even so, Salgado said she was confident Spain would still meet its deficit-reduction target for the year on both a national and regional level. She plans to meet with regional leaders later this week to discuss further measures to achieve this.

The government is aiming to reduce the deficit from 9.2% of GDP in 2010 to 6% in 2011 and finally 3% by 2013. The 2010 target was only achieved by central government covering the shortfall that the regions were unable to make up.

Yesterday Moody's questioned the ability of the government in meeting their target for the fist half of the year, which could impact the country's debt rating.

Moody's placed Spain's Aa2 rating on review for possible downgrade on July 29. However, the recent amendment to the constitution was viewed positively by the agency, who anticipated that this would have a stimulating effect on the economy and renew investor confidence.

Later this week the government is also expected to issue a decree for the re-introduction of wealth tax, which is expected to generate 1.4 billion euros in revenue for the treasury.