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Spain Deficit Goals at Risk

Towns and regions are squabbling with the government about spending and how to allocation tax receipts.

By Angeline Benoit, Bloomberg | Updated on August 22, 2012

Quarrels over who bears the brunt of cuts worth more than 10 percent of Spain’s annual gross domestic product threaten Prime Minister Mariano Rajoy’s plan to tackle the euro area’s third-largest deficit as a second bailout looms.

A seven-day rally that has driven Spain’s 10-year yield to 6.1 percent at 10:55 a.m. in Madrid from 6.9 percent may falter as squabbles between the government, regions and towns about spending and tax receipt allocations hobble deficit reduction. Spain will miss its targets for budget gaps of 6.3 percent of GDP this year and 4.5 percent in 2013 as the nation’s recession worsens, according to the median forecast of 12 analysts surveyed by Bloomberg News.

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