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Spain: no new austerity foreseen to cut deficit

13 April 2011 12:58 (UTC +04:00)

Baku - APA-Economics. Spain expects to meet its deficit-reduction targets this year without imposing new austerity measures as market confidence in the country’s public finances has recovered, the prime minister said Wednesday, Associated Press reported.

Jose Luis Rodriguez Zapatero said Portugal’s request for a bailout last week will be the last in Europe’s sovereign debt crisis.

Zapatero spoke in Beijing at a press conference after a meeting with Chinese investors at the conclusion of a two-day visit. Excerpts of his remarks were carried on Spanish National Television.

Spain has cut civil servant wages and other spending and frozen retirement pensions as part of an austerity plan designed to slash its bloated deficit and ward off the possibility of contagion from the eurozone debt crisis.

Its deficit target for this year is 6.0 percent of GDP, down from about 9 percent in 2010.

The International Monetary Fund says the 2011 figure is about right, but it expects Spain’s deficit-reduction drive to slow down as the country fights to recover from recession and deals with a 20 percent jobless rate. The IMF forecast Monday the deficit will be 5.6 percent of economic output in 2012, way above the 4.4 percent foreseen by the government.

Still, Zapatero was adamant that Spain has imposed all the belt-tightening it needs: "There is no forecast on the horizon that we will have to take more austerity measures. None."

He said the Cabinet will approve an important reform measure on Friday but gave no details. Spanish media quoted government officials as saying it would involve fighting tax evasion by rooting out Spain’s large underground economy. Some estimates say it accounts for as much as 20 percent of the country’s output.