Spain to miss budget deficit target (again)

Luis De Guindos, Spanish finance minister announced in the parliament today that Spain will miss this year’s budget deficit targets and is likely to record deficit of 3.6%, compared to 2.8% agreed with European Commission.  This is exactly what German finance Minister Wolfgang Schäuble and Bundesbank Chief Jens Weidmann has been critical of. They argues that it is the easing of European Central Bank (ECB), which has made countries across Euro Zone to become reluctant in pursuing reforms and bring down their deficit within 3% of GDP, anything above which is considered as excessive by the commission.

According to Mr. Guindos Sapin will reach 3% target not until next year. In 2015, it recorded deficit of 5%, far excessive than originally agreed with the commission in wake of debt crisis in 2011/12. He also projected lower growth rate for Spain of 2.7% this year, down from previous estimate of 3%.

German government is already under pressure from opposition over refugees and may face further backlash over Germany’s soft stance towards its Euro zone partners with regard to deficit.

While Euro Zone has come a long way from the debt crisis of 2011/12, vulnerability still remains without fiscal and banking integration.

Euro is currently trading at 1.133 against Dollar, while IBEX 35 is up 0.8%, trading at 8960.