Eurozone finance ministers meeting in Brussels have given Spain a tougher counter-estimate on how quickly it can reduce its budget deficit to comply with EU standards, while also approving Greece's new bailout.
Finance ministers from the 17 eurozone nations said Monday that they want Spain to shrink its budget deficit at a quicker pace than Madrid had suggested was reasonable, while also approving a second bailout package for Greece.
"The Eurogroup assesses that the timely correction of the excessive deficit should be ensured by an additional frontloaded effort of the order of 0.5 percent of GDP," said Luxembourg's Prime Minister Jean-Claude Juncker, referring to the meeting of eurozone finance ministers which he heads.
Spain's government had proposed a target of a 5.8-percent deficit for 2012, but its currency partners are now pushing 5.3 percent. The original target was 4.4 percent, before the newly-seated conservative government of Prime Minister Mariano Rajoy announced that the 2011 deficit was larger than expected.
A statement from the Eurogroup said "the Spanish government expressed its readiness to consider" the lower deficit figure, as it finalizes its budget proposals due next month. Madrid hopes to drop its deficit to 3 percent of GDP by 2013 - the limit prescribed by a recently signed fiscal pact among most European Union members.
EU Economy Commissioner Olli Rehn said the figures for the 2012 deficit were "sensible," given the persistently high unemployment and economic slowdown in Spain.
Athens closer to new bailout
Meanwhile, the finance ministers also signed off on a second bailout package for Greece after the government in Athens secured enough participation in a bond-swap deal to save the government some 105 billion euros ($138 billion).
The new round of emergency loans from the EU and International Monetary Fund, worth 130 billion euros, is to be given final approval later this week.
Juncker also said Monday that Greece's mountain of debt could drop to 117 percent of GDP by 2020, down from the 120 percent that a group of debt inspectors predicted in a recent report. Juncker said the lower figure was due to higher participation than expected in the bond swap deal.
acb/cmk (AFP, AP, dpa)