Friday

24th Nov 2017

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.

Commission warns Italy over high debt level

The Italian government must demonstrate it is making an effort, or the EU will consider launching a procedure. France and Romania are also under scrutiny.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

News in Brief

  1. Merkel: Germany remains 'active' in EU
  2. Work with Israel, Egypt on gas exploration, says Commission
  3. Only seven EU states have 'advanced' stage climate plans
  4. EU dashes integration hopes of eastern countries
  5. EU approves joint Irish electricity scheme
  6. German president to launch 'Grand Coalition' talks
  7. Irish opposition 'threatens national interest', says minister
  8. SPD drops opposition to grand coalition in Germany

Stakeholders' Highlights

  1. EPSU-Eurelectric-IndustriAllElectricity European Social Partners Stand up for Just Energy Transition
  2. European Friends of ArmeniaSignature of CEPA Marks a Fresh Start for EU-Armenia Relations
  3. Nordic Council of MinistersNordic Energy Ministers Pledge to Work More Closely at Nordic and EU Level
  4. European Friends of ArmeniaPresident Sargsyan Joined EuFoA Honorary Council Inaugural Meeting
  5. International Partnership for Human RightsEU Leaders Should Press Azerbaijan President to End the Detention of Critics
  6. CECEKey Stakeholders to Jointly Tackle the Skills Issue in the Construction Sector
  7. European Friends of ArmeniaLaunch of Honorary Council on the Occasion of the Eastern Partnership Summit and CEPA
  8. Idealist Quarterly"Dear Politics, Time to Meet Creativity!" Afterwork Discussion & Networking
  9. EPSUStudy Finds TUNED and Employers in Central Governments Most Representative
  10. Mission of China to the EUAmbassador Zhang Ming Received by Tusk; Bright Future for EU-China Relations
  11. EU2017EEEstonia, With the ECHAlliance, Introduces the Digital Health Society Declaration
  12. ILGA EuropeFreedom of Movement For All Families? Same Sex Couple Ask EU Court for Recognition