EC Approves Spain's Strict Austerity Program

The European Commission approves the strict austerity program undertaken by the Spanish government, EC Vice President and Monetary Affairs Commissioner Olli Rehn announced Wednesday in Brussels.

"We know that Spain is undergoing a very difficult re-balancing of its economy after many years of unsustainable policies. The government and the Spanish people are making significant efforts to ensure the sustainability of public finances. This involves hard choices, and sacrifices for many parts of the population. Progress is being made, even if the situation faced by many Spaniards remains very difficult," Rehn stated.

He reminded that Spain has adopted sizeable measures of fiscal consolidation to restore confidence to its public finances and these measures amount to around 5.25% of GDP in 2012 and to 2.25% of GDP in 2013. The estimated annual improvement in the structural balance this year and next year is in line with the effort required in the Council recommendation.

According to the Vice President of the EC, the risks to achieving the nominal targets for next year 2013 stem partly from an optimistic macroeconomic scenario underlying the 2013 budget and partly from the optimistic projections for social security.

"On the basis of this assessment, our conclusion is that Spain has taken effective action for 2012 and 2013. Thus, I have proposed yesterday to the College, and the College has adopted today a Communication concluding that effective action has been taken for these two years, 2012 and 2013, in restoring the sustainability of public finances. We send this Communication now to the Council for its deliberations and for its decisions," Rehn elaborated.

The Commission's view is that no further steps in the excessive deficit procedure of Spain are needed at present. However, the measures announced so far for 2014 fall short of what is required by the revised Council recommendation, he said.

"Therefore, we will of course closely monitor budgetary developments and I look forward to seeing the concrete details of the fiscal measures for 2014 shortly," the EC VP concluded.