Next Spanish PM to check for bad financial surprises: party

23rd November 2011, Comments 0 comments

Spain's next prime minister, Mariano Rajoy, will check for bad surprises in the accounts before deciding on spending cuts, his right-leaning Popular Party said on Wednesday.

The 56-year-old, grey-bearded Rajoy led his party to a crushing win over the ruling Socialists on Sunday, promising widespread austerity measures to plug the public deficit.

Some investors had expressed fears that when Rajoy assumes power in the next few weeks, he could declare that Spain's deficit is even worse than has been publically declared.

"We are in a very complicated situation; we have to know exactly what the Spanish economic situation is," Popular Party campaign chairman Miguel Arias Canete told Onda Cero radio.

Popular Party candidates who had swept to power in regional elections in May often discovered "surprises" in the accounts of the outgoing Socialist administrations, Canete said.

"You cannot draw up a packet of measures, which could be more ambitious or less ambitious, without knowing exactly the scale of the reduction in public spending that you are facing," he said.

"Facing up to a cut of 15 billion euros ($20 billion) is not the same thing as 30 billion euros ($40 billion), the measures are very different," the party official said.

Rajoy is likely to be sworn in about December 20, facing a 21.5-percent jobless rate and the threat of a recession at the start of 2012 after zero economic growth in the third quarter.

The conservatives have said they will slash spending to meet Spain's deficit-cutting targets despite analysts' expectations of some slippage on the deficit this year.

Spain has promised to trim the deficit, a key worry for financial markets, from 9.3 percent of gross domestic product last year to 6.0 percent this year and 4.4 percent in 2012.

Regardless of those promises, markets have refused to let up in their punishment of Spanish debt and stocks since Rajoy's victory.

Spain's borrowing costs soared to 14-year highs Tuesday at its first debt auction since the general elections, raising the pressure for rapid economic reforms.

"In tough times for Spain and Europe you have received a clear mandate from your people to pass and implement the necessary reforms," German Chancellor Angela Merkel wrote to Rajoy in a letter released Tuesday.

But analysts warn that even rapid action by a Popular Party government may not be enough to stabilise the rates on Spanish sovereign debt.

Neither the International Monetary Fund nor Brussels' bailout mechanism -- the European Financial Stability Facility -- have the firepower to rescue Spain or Italy, he said.

Some analysts have said the debt crisis can end only if the European Central Bank backs the euro by committing to act as a lender of last resort -- an option so far opposed by Germany and the bank itself.

© 2011 AFP

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