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The EU's statistics office Eurostat has called for the Spanish Ministry of Finance to revise the estimated public deficit upwards for 2012 as a result of the government's decision to delay tax refunds due at the end of 2012 until this year.
After the adjustment imposed by Eurostat, the shortfall in the state's books for last year increases from 6.74% to 6.98%. The Finance Ministry, headed by Cristóbal Montoro, said today that the change imposed on the treatment of tax refunds will oblige the department to amend the figures for the historical series, which dates back to 1995.
The secretary of state for the budget, Marta Fernández Currás, said the methodological treatment of tax refunds has been changed in such a way that requests for refunds by taxpayers are recognized as obligations without prior recognition of the validity of such claims by the administration.
The European Commission is expected to grant Spain some leeway in bringing the deficit back within the EU ceiling of 3% of GDP as a result of the country slipping back into recession for the 2nd time in 4 years. Currently, the administration of PM Mariano Rajoy is committed to doing so in 2014.
It is not clear how much longer Brussels will give Spain to reach the target. A lot will depend on the macroeconomic scenario for the next few years. The government's official target for GDP for this year is for a contraction of 5% of GDP. However, Rajoy last week said the government plans to revise the figure, which most experts believe is unrealistic. The IMF, the OECD and the Commission and the Bank of Spain believe the decline will be close to triple the government's initial estimate. They also expect unemployment to move closer to 27% this year from 26% at the end of 2012.
Currás said the deficit in the first 2 months of this year was €23.561 billion, equivalent to 2.22% of GDP, up from 1.95% in the same period a year earlier. The current target agreed with Brussels for the shortfall this year is 4.5% of GDP.
