Sunday

25th Feb 2018

Ballooning deficit to up pressure for Spanish bailout

  • Will the crisis last five more years, as the German Chancellor has predicted? (Photo: Valentina Pop)

The EU commission on Wednesday (7 November) is likely to forecast a larger-than-expected deficit for Spain, adding pressure on the country to ask for a bailout.

Spain's public deficit for this year - already adjusted twice in recent months - is now expected to reach eight percent of the country's gross domestic product, according to draft figures seen by AFP.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

This will be almost two percent more than a previous estimate when Spain obtained a year extra to bring its deficit below the three-percent threshold under EU rules.

In addition, recession is to last until 2014, making it difficult for the Spanish government to push for more austerity measures to bring the deficit down.

But the European Commission has in the past few weeks indicated it will not suggest Madrid be sanctioned for missing its deficit target this year so long as it sticks to the 2014 deadline of bringing the public finance gap below three percent.

Part of the extra expenditure is the bank bailout which is to be reimbursed from the eurozone bailout fund in the coming months. Up to €100 billion had been earmarked from the eurozone fund, but an audit has since said only about €60 billion will be needed.

Spanish Prime Minister Mariano Rajoy tried to be positive about the future. "In 2014, there'll be growth in Spain. The worst year will have been 2012 and next year will be better," he said in a radio interview on Tuesday.

"All the measures we're taking are aimed at economic recovery ... it's very difficult to create jobs when you owe so much."

But with one in four workers out of a job and regions asking for bailouts from the government, the pressure on the government to ask for a full-blown eurozone bailout is set to increase.

Greece

Meanwhile, the Greek parliament is due to vote on the €13.5 billion worth of spending cuts demanded by the troika of international lenders in order to disburse the next tranche of bailout money. Without this tranche, Greece faces the prospect of bankruptcy by mid-November.

But Greeks - with the country in its fifth year of recession - have little appetite for more cuts. A general strike, started Tuesday, in protest at the continuing austerity measure has virtually closed the country down.

Meanwhile, support within the ruling coalition for the cuts is also shaky. But Prime Minister Antonis Samaras has indicated he is confident that MPs from the opposition will back the bill, securing enough votes to pass it.

The rest of Europe is watching the debate closely. "Our Greek friends don't have different options or another choice. They have to do it," Eurogroup chief Jean-Claude Juncker said during a lecture in Singapore also on Tuesday.

Analysis

Spain's bailout dilemma: not if, but when and how

Markets rallied on Tuesday when two German lawmakers suggested Berlin is warming to the idea of a Spanish bailout. But the wait-and-see game in Madrid is likely to take a few weeks longer.

Baltic states demand bigger EU budget

The leaders of Estonia, Latvia, and Lithuania say in a joint letter that they are open to talks on creating "new own resources" for a bigger EU budget after the UK leaves the EU.

Opinion

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

News in Brief

  1. EU calls for immediate ceasefire in Syria
  2. UK's post-Brexit vision is 'pure illusion', Tusk says
  3. EU leaders express solidarity with Cyprus in Turkey drill row
  4. EU to double funding for Sahel forces
  5. EU parliament president: 'The immigration problem is Africa'
  6. May to unveil EU departure strategy next week
  7. Pregnant workers may be dismissed, EU court rules
  8. Romanian minister demands anti-corruption prosecutor fired

Stakeholders' Highlights

  1. ILGA EuropeAnkara Ban on LGBTI Events Continues as Turkish Courts Reject NGO Appeals
  2. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  3. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  4. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  5. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  6. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  7. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. EU agrees budget to focus on defence, security and migration
  2. EU leaders nix transnational lists, cool on 'Spitzenkandidat'
  3. Regions chief: calls for smaller EU budget are 'impossible'
  4. Election fever picks up This WEEK
  5. EU-Morocco fishing deal casts doubt on EU future foreign policy
  6. EU leaders put 'Spitzenkandidat' on summit menu
  7. European far-right political party risks collapse
  8. The key budget issues on EU leaders' table