Spain public deficit may even top 8 pct: Minister

Spanish economy likely to continue to shrink in the first quarter of 2012, missing the target set by the government, says official

Spain's public deficit for 2011 may be even higher than the above-target 8 per cent of gross domestic product forecast by the new centre-right government on Friday, Economy Minister Luis de Guindos said on Monday.
The target for last year was 6 per cent of GDP, but the conservatives said last week that had been missed, giving it a mountain to climb to hit this year's already tough deficit-reduction goals in an economy on the brink of recession.
"We'll need to see, but it's possible that we have gone over the 8 per cent mark, though expect that it hasn't done so by much," Guindos said during an interview with Cadena Ser radio, his first since taking the post after the conservatives won the November election.
The economy may contract in the first quarter of 2012 after shrinking in the previous three months, he said, reflecting analyst expectations that the Spanish economy is already in recession.
The euro zone's fourth largest economy has been a focal point of the debt crisis as the previous Socialist government fought to deflate one of the highest public deficits in the bloc by introducing massive spending cuts and tax hikes.
The euro fell to a decade low versus the yen on Monday as concerns about the financing needs of indebted euro zone countries continued to weigh on the single currency.
The new government decreed new tax hikes on Friday worth an estimated 6 billion euros (US$7.79 billion) a year and spending cuts worth 8.9 billion euros, with which it aims to reduce the deficit by 1 percentage point in the short term.
Measures to balance the public accounts will be accompanied by structural reforms which will help restart the stalled economy, Guindos said.
"The government has a very aggressive reformist agenda for the next few weeks and months, in the labour market, the financial system, in the goods and services markets and competitiveness," he said.
The austerity measures announced last week are the first of many, Deputy Prime Minister Soraya Saenz de Santamaria said. The government must find savings worth more than 35 billion euros in 2012 to meet the deficit goal of 4.4 per cent of GDP.
Spaniards, which handed the government of Prime Minister Mariano Rajoy the largest parliamentary majority in 30 years in the November election, are largely resigned to a tough few years, according to polls.
Almost half of people surveyed by Sigma Dos for El Mundo did not expect an economic recovery until after 2013, according to a poll published on Sunday.
Only 15.1 per cent said they expected some recovery this year, while 37 per cent believed the Spanish economy would fair worse in 2012 than in 2011.