Spain will be offered more time to hit the budget deficit targets it agreed with the EU, but only if Madrid meets new conditions, including an independent audit of the restructuring plan for its troubled banks.
The European Commission has insisted on the extra conditions – which include ensuring more fiscal control over Spain’s profligate regional governments – before allowing Madrid to delay its 2013 deficit target by a year.
Spanish officials insisted that they were not seeking any delay to the deficit targets, seen by European leaders as an essential part of the eurozone’s strategy to resolve its financial crisis. EU officials said there were some members of the Spanish government, headed by Mariano Rajoy, the prime minister, who were resisting the offer of leniency because they feared that investors would see it as evidence of creeping fiscal indiscipline. The government has pushed through €27 billion in austerity measures.
Spain has said it will intervene in any of its 17 autonomous regions that fail to meet their deficit reduction targets, which have been set a limit of 1.5 per cent of gross domestic product for this year. Spanish regions are due to present their budgets next week.
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