Spanish prime minister Mariano Rajoy has warned that the country will miss the deficit reduction target it agreed with the European Union (EU).
Rajoy says the government will seek to bring its deficit down from 8.5% of GDP in 2011 to 5.8% this year. The Spanish government previously agreed to a target of 4.4%.
The news comes after all but two of the EU’s 27 members signed a fiscal treaty to prevent countries from running up the kind of large debts that pushed Greece, Portugal and Ireland into needing bailouts from the international community.
The Spanish prime minister said he has not discussed the deficit with fellow EU leaders at the first session of the European Council.
“We will present our proposals according to what we consider to be reasonable and sensible, but this is not closed here, nor negotiated here nor discussed here,” he told reporters.
“Nobody has asked me about the public deficit in Spain.”
Rajoy’s statement raises the risk that the country could face sanctions for breaching the union’s deficit goal. However, he pledged that the deficit will fall to 3% of GDP by 2013, which would bring Spain into line with the fiscal rules.
Spain has already outlined austerity measures and tax cuts worth €15 billion (£12.5 billion) as it attempts to bring government finances under control. Further cuts are expected to be announced when it presents its new budget.
The EU’s new fiscal compact was signed by every member of the union apart from the UK and the Czech Republic. It requires members to have their budgets scrutinised by their peers and can hit them with fines of 0.1% of GDP if they fail to stick to fiscal rules.
Speaking at the signing ceremony, Herman Van Rompuy, president of the European Council, said: “The restoration of confidence in the future of the eurozone will lead to economic growth and jobs.
“This is our ultimate objective. The targets on deficits and debts are intermediate targets, no aim in itself.”