Crisis in Spain devours budget surplus

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Revenues fall as housing market slump and oil-price surge take toll

22 July 2008

MADRID - Spain's state accounts have fallen foul of the country's rapidly slowing economy as a surplus turned to a deficit in the first half of 2008 for the first time in three years.

The secretary of state for finance, Carlos Ocaña, on Monday said that the state posted a shortfall of €4.683 billion in the first six months of the year, equivalent to 0.42 percent of GDP. In the five months to May, the state's coffers were in the black to the tune of EUR 2.772 billion.

Revenues fell 4.8 percent due to a crash in the housing market, where home sales have plunged. The surge in oil prices also caused companies' profit margins to narrow and corporate income tax receipts to fall.

Spending in the first half increased 10 percent.

Ocaña said this reflected the impact of an economic stimulus package, which included an across-the-board rebate of EUR 400 per taxpayer.

The package, Ocaña added, would cost the government some EUR 8 billion in lost revenues, which in the absence of the battery of measures to reactivate the economy would have risen 3 percent this year instead of an expected fall of 4 percent.

The official predicted the state would end the year with a slight deficit. The government originally set a 1-percent budget surplus target for 2008.
[El Pais / A. Sim / Expatica]

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