Sunday

5th Feb 2023

EU statistics office to double-check Spanish deficit

  • Madrid by night: Eurostat officials are checking the country's books (Photo: PromoMadrid/Max Alexander)

The EU statistical office, Eurostat, will this week send experts to Spain to double-check why the country's deficit for 2011 is worse than previously declared.

The move was confirmed by a commission spokeswoman on Monday (21 May), amid attempts by Spain to convince investors that it is different than Greece.

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The Spanish government last week informed Eurostat that an investigation into regional spending, following the passage of a new financial disclosure law, revealed that the 2011 budget deficit is in fact 8.9 percent of GDP.

The new number represents almost half a percent more than previously reported and comes after the public deficit was already revised twice in less than six months.

"Eurostat intends to clarify without delay whether this adjustment concerning the lower level of the general government can be considered as exhaustive, in co-operation with the Spanish statistical authorities," the EU statistical bureay said in a press release.

Eurostat obtained extra scrutiny powers after repeatedly being lied to by Greek statistics authorities about the country's deficit and debt levels, which prompted the first bail-out back in 2010.

Spain's deficit troubles could lead to the EU commission recommending a fine of 0.2 percent of GDP if at the end of May it finds the government has not taken enough measures to narrow the budget gap.

A spokesman for economics commissioner Olli Rehn on Monday stressed that his boss repeatedly underlined the importance of "sound statistics" when establishing the deficit. But he also noted that Madrid has undertaken several reforms, including on fiscal discipline and on troubled banks.

Spain's economy minister Luis de Guindos on Monday (20 May) promised that the government will meet the tough deficit target for 2012 - 5.3 percent of GDP - despite the revised figures for last year and a prolonged recession.

Madrid already unveiled €27.3 billion worth of budget cuts and asked regions to slash €10 billion from their education and health care budgets.

"The agreed adjustment compensates for this deviation and will reach the 5.3 percent," De Guindos told reporters.

"We are building the foundations for correcting the imbalances of the Spanish economy, we are building the foundations for a future recovery," he said.

De Guindos also admitted that Bankia, the troubled Spanish bank which had to be nationalised earlier this month, needs a capital infusion of €7.5 billion. If the bank alone cannot rise the money, the government will have to step in, raising its total Bankia bill to €12 billion and complicating the deficit-reduction drive even further.

Ratings agencies recently downgraded dozens of Spanish banks, which have been hardly hit by a property boom gone bust.

Two global consulting firms - Roland Berger and Oliver Wyman - were tasked on Monday with valuing the exposure of Spanish banks to bad loans and mortgages. According to figures by the Spanish central bank, the exposure is estimated at 60 percent of their property portfolio, to the tune of €184 billion at the end of 2011.

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