Today's Coming Crisis Movie

Monday, March 5, 2012

Spain on collision course with Brussels over budget deficit targets

European commission accuses Spain of 'serious deviation' after PM Mariano Rajoy sets deficit target of 5.8% rather than 4.4% agreed

Spain is on a collision course with the European commission after Brussels fired a warning shot at the austerity wracked country for planning to overshoot its budget deficit targets.

In an early test for the EU's new fiscal regime, the commission said Madrid was engaged "in a serious deviation" from previous pledges after Mariano Rajoy, Spain's new conservative prime minister, confirmed the government would fail to meet a budget deficit target this year of 4.4% of gross domestic product agreed earlier with Brussels. Rajoy has set a new target of 5.8% for this year after revealing that last year's deficit was 8.5%.

The stand-off between the European authorities and Spain, a vulnerable party in the eurozone's debt crisis, came as Greece raced against the clock to sign up willing creditors for writing down half of its debt to private lenders.

Athens has until Thursday evening to conclude a debt swap with its private creditors, reducing its obligations by €100bn as a central element in its new €130bn bailout accord with the eurozone.

It remained unclear on Monday night whether some 90% of Greece's private creditors would volunteer for the deal by Thursday, casting uncertainty over the prospects for the bailout. Read More