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EU signals Spain to get more time to reduce deficit
Spain's weak economy means Madrid will likely get another year to bring its budget deficit down to EU limits by 2016, the European Commission said on Friday.
Spain is suffering from twin economic and fiscal crises and is trying to balance the need for investor confidence with a more humane pace of debt reduction at a time when more than six million people are out of work.
"The postponement of the correction of the excessive deficit to 2016 is consistent with the current technical analysis," said the Commission, which monitors EU countries' debt and deficit cuts and has the power to penalize those that don't keep up.
The Commission will take a formal decision on whether to give Spain more time to reduce its deficit on May 29, but it must still be signed off on by EU finance ministers.
Spain missed its budget deficit goal in 2012, reporting a 10.6 percent shortfall - the biggest in the European Union last year - compared to a target of 6.3 percent, mainly because of a large one-off expense to recapitalise banks.
Stripping out those bank rescues, Spain's real challenge will be to cut the budget deficit from 7.1 percent in 2012 to 3 percent in 2016 under EU rules.
The Commission cautioned that even with more time, Madrid faced "an ambitious fiscal consolidation path."
Spain has been in and out of recession for the past five years since its property bubble burst, sending unemployment to record levels.
[Source: Reuters, Brussels, 26Apr13]
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