Spanish official public finances lurched into deficit
Official data reveals that Spanish public finances accumulated a deficit equivalent to 3.8% of GDP in 2008.MADRID – Spanish public finances lurched into deficit in 2008 to 3.8 percent of output and breaching the EU limit, official data showed, as the government spent heavily to stimulate the economy through the global crisis.
The data from the finance ministry showed a deficit sharply beyond the European Union ceiling of 3.0 percent of gross domestic product, and marking a big reversal from a surplus of 2.23 percent of output in 2007.
The EU's Stability and Growth Pact limits public deficits of eurozone countries to 3.0 percent of output. Eurozone governments are expected to achieve a public surplus in times of growth.
The public budget figure comprises the budgets of central government, welfare services and local authorities.
The government had already forecast that the deficit would exceed the limit in 2008 and 2009 because of government measures to shore up financial markets and boost the sluggish economy.
Formerly one of the eurozone's chief engines of economic growth and job creation, Spain had moved its accounts into surplus but suffered an abrupt change of fortunes in 2008 when the global financial crisis hastened a correction that was already underway in its key real estate sector.
The Spanish economy, the fourth biggest in the eurozone, officially entered recession in the last quarter of 2008, when once-booming activity shrank by 1.0 percent, the second quarter running of contraction.
Last week, the European Commission took the first move to tackle swelling budget deficits in six EU states, including Spain.
But the EU executive arm said it would use the "full flexibility" available to consider the six cases of deficit overrun due to the "exceptional circumstances" engendered by the US-born crisis that has hit bank lending and consumer spending, putting jobs and businesses at risk.
In January, the credit rating agency Standard and Poor's downgraded the long-term rating for debt issued by Spain.
AFP / Expatica