Spain begs time to fix finances, eyes growth

Spain forecast Friday it would climb out of its bitter recession in 2014 but needed two extra years to meet the European Union's target for reining in its public deficit, AFP reports. It announced its latest gloomy growth forecast for the current year along with a "stability plan" that aims to spur economic growth after more than a year of harsh cutbacks. The government said Spain's economy, the eurozone's fourth-biggest, would shrink by 1.3 percent in 2013 and timidly return to growth of 0.5 percent in 2014. But it admitted it would likely take until 2016 to bring the country's public deficit -- a crucial measure of financial stability -- under the European Union's three-percent limit. Unemployment will slide to 26.7 percent over 2014 and to 25 percent in 2015, the government added, announcing the latest crisis reforms it must send to Brussels for approval. It forecast the public deficit would be 6.3 percent of gross domestic product (GDP) in 2013 -- well above its earlier target of 4.5 percent. The deficit would ease to 2.7 percent by 2016, it said, pushing back by two years the target earlier agreed with European authorities to bring it within the three-percent limit. The EU's executive later approved the announcement, saying in a statement that it considered Spain's plan a "balanced -- but still ambitious -- fiscal consolidation path, given the difficult economic environment". International Monetary Fund chief Christine Lagarde said she supported "the Spanish government's objectives of restoring a sound fiscal position while securing a recovery and creating jobs". The 2013 growth figure, sharply down from an earlier estimate of a 0.5 contraction, reflected the ongoing damage from the collapse of a building boom in 2008 that thrust Spain into a deep double recession. "In 2013 the worst quarter will be the first quarter... and from there the data will improve," Finance Minister Luis de Guindos told a news conference. "The year 2014 is the year of recovery. We will reap the fruit of our economic policies." Meanwhile the public debt would climb to 91.4 percent of GDP in 2013 and reach 99.8 percent by 2016, he said. The government is fighting to stabilise Spain's public finances through austere economic cuts that have sparked angry street protests. Prime Minister Mariano Rajoy says the steps are needed to curb the public deficit and help the country save 150 billion euros ($195 billion) by 2014. Friday's new plan contained structural reforms, but no major measures on the scale of the tax hikes and budget cuts announced last year. It included measures to streamline the public administration and boost small businesses. De Guindos said ahead of the announcement that the plan aimed for "a better balance between deficit reduction and economic growth". Deputy Prime Minister Soraya Saenz de Santamaria said reforms contained no general rises in sales tax or income tax, though they would extend by one year a temporary rise in the latter which had already been set for 2013-2014. Saenz said the government would also be reviewing the pensions system. Media reported this week that the government was considering raising the retirement age beyond the current legal limit of 67. The government said it also planned a reform to lower the deficit of Spain's energy sector. The latest official unemployment figures on Thursday showed that Spain's jobless rate surged past 27 percent in the first quarter of this year. Hundreds of people rallied outside parliament in central Madrid late Thursday in the latest of two years of street protests in anger at the crisis. Authorities said 29 people were injured and 15 arrested.