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Spain set to go deeper into the red

19 May 2004

MADRID – The cost of state television and running Andalusia will push the government further into debt by the end of this year, the Finance Minister said Wednesday.

In a press conference, Miguel Ángel Fernández Ordóñez said Spain will close 2004 with a deficit of at least 0.9 percent of its GDP.

The government planned to pay off debts run-up by the regional government of Andalucia and by state-owned television and radio broadcaster Radiotelevision Española (RTVE).

Ordoñez said he would ask Congress to amend the 2004 budget so that Madrid can eliminate the EUR 2.3 billion debt incurred by the government of Andalucia during 1997-2001.

Debts related to RTVE amount to some EUR 600m per year.

According to government data, Spain posted a budget surplus of EUR 10.17 billion, or 1.29 percent of the GDP, through April, an 8.1 percent decline compared to the same period last year.

Government revenues came in at EUR 43.69 bn during the January-April period, down 0.3 percent from last year, while expenditures rose 2.3 percent to EUR 33.51 bn.

Initially, the government forecast the debt would stand at 0.4 percent of GDP.

Ordóñez said this year’s deficit was “circumstantial” and debts with Andalusía will be written off this year.

He claimed the deficit will fall to a more acceptable figure in 2005.

In order to pay-off  Andalusia’s debt, the finance ministry must approve an extension to the budgetary law of 2004 and grant an extraordinary loan.

This is because part of the EUR 2.2 billion of state reserve funds has been earmarked to cover other expenses.

Since both debts had not been taken into account when drawing up the 2004 budget, Ordóñez said this year’s expected debts at the end of 2004 will  match the former government’s forecast of 0.4 percent of the GDP.

He refused to compensate this year’s deficit with the surplus expected from social security payments as a result of demographic changes and increased immigration.

The surplus will be put into reserve fund to pay for pensions.

[Copyright EFE with Expatica]

Subject: Spanish news