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Montoro Accuses Spanish Socialists of Hiding Budget Deficit

Source: Bloomberg - Thu 16th Feb 2012
Montoro Accuses Spanish Socialists of Hiding Budget Deficit

Spanish Budget Minister Cristobal Montoro accused the former Socialist administration of hiding part of last year's budget deficit as a spat over statistics dragged on eight weeks after the People's Party came to power.

"We are working to correct the large and hidden budget deficit that you left us," Montoro said in Parliament in Madrid today after a question from Socialist lawmaker Antonio Hurtado on whether the government overstated the 2011 budget gap.

The PP government said on Dec. 30 it inherited a shortfall of about 8% of GDP, wider than the previous administration's goal of 6%. Prime Minister Mariano Rajoy hasn't yet published final data for 2011, while he is coming under pressure to present the budget for this year before his self-imposed deadline of the end of March.

EU Economic and Monetary Affairs Commissioner Olli Rehn urged the Spanish government yesterday to "move quickly" to prepare this year's spending plan. Spain is working as "quickly as possible" on the "complicated and laborious" process of drafting the budget, Deputy Economy Minister Fernando Jimenez Latorre told reporters in Madrid today.

"We're under pressure from Brussels, from the markets, and we're very conscious of the importance of the fiscal adjustment," he said, when asked about Rehn's comments.

Rajoy has said he will present the budget at the end of March as he wants to base it on the EU's growth forecasts, which are due to be published on Feb. 23. Using the EU estimates will bolster the "credibility" of the budget, Montoro said today, rejecting Socialist accusations that the government is delaying the spending plan's presentation until after regional elections in Andalusia on March 25.

The opposition Socialists, which suffered their worst electoral defeat in Spain's three-decade-old democracy last year, are also putting pressure on Rajoy to present the budget before the Andalusian vote. He should unveil final 2011 deficit numbers as soon as possible, Inmaculada Rodriguez Pinero, the party's economy spokeswoman, said in a statement yesterday.

The new government may have overstated the 2011 deficit, Reuters reported yesterday, citing three unidentified European Union officials. The Socialists said in December the government's 8% estimate for the 2011 shortfall was an "excuse" to justify 15 billion euros of spending cuts and tax hikes announced the same day.

Rehn told reporters yesterday that reports the EU is considering sanctions against Spain are "incorrect and misleading." In November, the commission said it expected Spain's 2011 deficit to amount to 6.6% of GDP, narrowing to 5.9% in 2012. Spain has committed to a shortfall of 4.4% for this year.

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