* Spain's 2012 deficit beats consensus
* Public shortfall helped by strong December income
* Brussels expected to relax deficit goals
* Government says needs no new austerity measures this year
By Paul Day
MADRID, Feb 28 Spain said on Thursday it will
not need new austerity measures this year after its public
deficit beat forecasts of a deeper effect from prolonged
The deficit was 6.7 percent of gross domestic product (GDP)
in 2012, the government said, missing a goal of 6.3 percent but
below European Commission and economists' forecasts of 7 percent
"I insist that what we achieved is really big, important,
really notable and it will help Spain and its regional
governments recover their credibility," Treasury Minister
Cristobal Montoro said at a news conference.
Investors pushed debt premiums for the euro zone's fourth
largest economy to a euro-era high last summer, before the
European Central Bank promised to backstop troubled economies'
bond markets, on concern Spain could not control its deficit.
Spain's public shortfall was 8.9 percent in 2011, well above
target and forcing the conservative government, which took power
in Dec. 2011, to pass over 60 billion euros ($79 billion) of
unpopular tax hikes and spending cuts that will continue to take
effect this year.
Including the one-off cost of rescuing the country's
troubled banks - which equalled 3.25 percent of GDP - the
deficit was 9.99 percent of GDP last year, Montoro said.
A cash injection late in the fourth quarter from a
3-percentage-point hike in value-added tax and changes to the
corporate tax calendar helped the government reduce the deficit,
according to preliminary figures.
Even as retail sales tanked and industry froze in December,
data shows VAT receipts rose 176 percent in that month, year on
year, to 3.2 billion euros ($4.2 billion) and corporate tax
income rose 112 percent to around 4.2 billion euros.
The December boost helped to shrink to under 7 percent a
12-month deficit that at the end of October had stood at 9
That rapid shrinkage has led some economists to calculate
that future tax receipts were booked into 2012 income and
payments delayed to boost the headline figure.
While Spain is not expected to have broken any rules in its
accounting, putting off payments could come back to haunt the
government in 2013, economists said.
"The figures are completely out of line with the current
economic environment. It's only a few decimal places here and
there due, I suspect, to some delayed payments to suppliers and
the early declaration of some tax receipts," said an economist
at a leading Spanish think tank, who preferred to remain unnamed
until the full December details had been reported in mid-March.
"But, this is feast today, famine tomorrow. They're shifting
all the problems to 2013."
Montoro said European Commision statistics agency Eurostat
would not have any issues with Spain's public accounts.
NEW FOCUS ON STRUCTURAL DEFICIT
Brussels has said it is satisfied with Prime Minister
Mariano Rajoy's cuts and reforms and the European executive is
expected to give Spain a second extension on shrinking the
deficit to under 3 percent, currently set for 2014.
Brussels' current forecast is for Spain's deficit to jump to
7.2 percent next year as temporary tax hikes expire.
It is still unclear how much relaxation Spain will get on
its 2013 deficit target, which is now set at 4.5 percent of GDP,
but Montoro was confident the government would not have to
announce new budget cutting measures.
"There is no reason at all to introduce new budget cutting
measures this year," he said.
Spain's 17 autonomous regions were largely to blame for the
country's high 2011 deficit, but Montoro said the regions all
together came very close to meeting their target of a deficit
equal to 1.5 percent of GDP.
That showed the government has been successful in reining in
the overspending regions, which will help convince Europe to
ease demands, economist at Spanish bank BBVA Miguel Cardoso
"I think Spain, to have been able to reduce the deficit by
two and half points in this recessive environment, has won a
certain level of flexibility," Cardoso said.
"We think if the new target is around 6 percent (for this
year), more measures won't be necessary...what they need to do
is specify what they plan to do from 2014."
Brussels has increasingly focused on members' structural
deficits, which eliminates the effects of the recession.
The European Commision has calculated that Spain reduced its
structural deficit last year by 1.4 percent of GDP, well below a
recommendation to cut it by 2.7 percent of GDP.
Montoro, however, said the government had cut the structural
deficit by almost 3.5 percent of GDP last year but said Brussels
must now look over the figures to see if it agrees.
The economy contracted 1.4 percent last year, the second
worst yearly slump since 1970, but the government expects
growth, after more than almost two years in recession, by the
third or forth quarter. ($1 = 0.7628 euros)