The European Commission requires Spain to make more fiscal adjustment in 2011. Spain already imposed several austerity measures and even introduced a debt ceiling in its constitution, a very rare move.
Not only is 2011 drawing to an end, but Spain is also on the eve of elections. Spanish voters will go to the polls on November 20th, and power is expected to shift from left to right. Will the new government introduce new measures quickly? Will it be on time for the speedy markets?
The European Commission cut its GDP forecast for Spain to only 0.7% in 2011 and 2012 as well. A contraction of 0.1% is expected in Q4. Hope for stronger growth is reserved for 2013. Â Unemployment is expected to stay above 20% in 2013. Not very hopeful.
The EC sees Spain missing the deficit target of 6% of GDP due to the regional governments’ deficits and the social security system and wants to see cuts in these areas, and in this year.
Spain’s public deficit stands on almost 70% of GDP in 2011, and is expected to rise to 78% in 2012. Information through El Economista.
Since August, Spain distanced itself from Italy. Spain adopted austerity measures in a rapid manner, while Italy took its time. Intervention by the ECB was seen in both countries’ bond markets.
The focus is currently on Italy, but may soon shift to Spain and France, which also sees scary yields.
