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EU orders Spain to submit new budget as election nears

The European Commission on Monday ordered Spain to submit a new draft budget with lower deficit estimates to avoid violating the bloc’s tough spending rules, in a blow for the government ahead of Spanish elections.

The official warning from Brussels comes ahead of Spain’s December 20 general election, in which the economy is expected to be a key issue for the conservative government of Prime Minister Mariano Rajoy.

The Commission, the EU’s executive arm, said that Spain’s draft budget for 2016 was “at risk of non-compliance” with rules brought in following the global financial crisis, adding that it “invites the national authorities to present an updated draft budgetary plan.”

It added: “The Commission expects Spain’s headline budgetary deficit to decrease to 4.5 percent this year and to 3.5 percent of GDP in 2016, not meeting the target for Spain to correct the excessive deficit by 2016.”

The EU limit for deficits is 3.0 percent of gross domestic product.

Valdis Dombrovskis, EU vice president for the euro, said that Spain had made a “remarkable” turnaround from the crisis but that Madrid “has to stay the course of reforms and responsible fiscal policy.”

Spain’s Rajoy enjoys an absolute majority in parliament with his conservative Popular Party (PP), but opinion polls suggest support for the opposition Socialist Party is surging.

Running third in polls is the far-left party Podemos, which wants to loosen the grip of austerity introduced by Rajoy’s government after it came to power in 2011.

Blindsided by the debt crisis, Spain implemented unprecedented austerity measures to reduce its budget deficit.

From 10.6 percent in 2012, the deficit fell to 5.8 percent last year.