Spain says budget gap is wider than reported
Baku, April 3 (AZERTAC). Spain said on Wednesday that its 2012 budget deficit was wider than it reported a month ago, again raising questions about the reliability of its government budget data.
The Budget Ministry said it revised the deficit to 7% of gross domestic product after holding discussions with the European Union's statistics agency and changing the accounting treatment for tax refunds. Spain had earlier reported the gap was 6.7% of GDP.
The revised deficit figure will make it harder for the government to narrow this year's budget gap to the 4.5%-of-GDP target agreed with the EU, a challenging task in the second year of a Spanish recession. On Tuesday, the central bank predicted that Spain's economy would contract 1.5% this year—three times what the government forecast last summer. Lately, Spain has been in talks with the European Commission about relaxing its budgetary objectives for 2013.
Last year Spain twice raised the size of its 2011 deficit from the 8.5%-of-GDP figure it had first reported as final. The first revision cited additional budgetary overruns by the country's 17 regional governments; the second revision belatedly took account of public aid to ailing banks. The revisions caused criticism of Spain's accounting system and concern among investors, driving up the government's borrowing costs.
On Wednesday, the Budget Ministry said discussions over the past week with the EU agency Eurostat had led to a revised accounting procedure for tax refunds paid to Spanish citizens and companies.
Since 1995, the ministry said, Spain had counted tax refunds at the time they were approved for payment, not when they were claimed on tax returns. A ministry spokesman said the government delayed approval and payment of billions of euros in refunds claimed in 2012 until January and February of this year because it took extra care to make sure the claims were correct.
Under Eurostat rules, those refunds should have been counted last year. Now the government will have to revise its budget figures going back to 1995, the ministry spokesman said.
The government had come under criticism in Spain for delaying the tax refunds to make its budget performance look better and for adding to the pain of companies and households already squeezed by growing unemployment and higher taxes.
"The policy of delaying tax refunds during a credit crunch makes little sense for the real economy," said Josй Ignacio Conde-Ruiz, deputy director of the Fedea foundation for applied economics. "It's not going to help Spain's credibility."
Other news in this section
