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Monday, July 9, 2012

Spain to get longer to reach budget goal

BRUSSELS, July 9 (Reuters) - Europe will grant Spain an extra year to reach its deficit targets after it outlines further budget savings to finance ministers meeting in Brussels, diplomats said on Monday.

Although no final decision is expected at a Eurogroup meeting of euro zone finance ministers for a bailout of Spain's banks, a wider gathering of EU finance chiefs on Tuesday is set to ease a debt goal that has pressured Madrid to make punishing cuts that are exacerbating a recession.

Spanish and Italian borrowing costs continued to rise on Monday towards levels considered unsustainable in the long term as investors saw little chance of a respite in the euro zone's debt crisis from the Brussels meetings.

"Spain's budget consolidation targets will be adjusted to give it an extra year," said one of the diplomats.

"This is not a unilateral move. Spain needs to make the necessary cuts to reach that goal and this will be discussed on Tuesday at the Ecofin (meeting of ministers). I expect the extra year to be granted." Read More