Struggling Spain, reluctant to call for a debt bailout, faces slower growth and a much bigger public deficit than its government initially expected, according to new EU estimates seen by AFP Tuesday.
This year's public deficit - the shortfall between government spending and revenues - will come in at 8.0 percent of Gross Domestic Product, well above the target of 6.3 percent agreed with Brussels when Spain was given an extra year to put its strained finances in order.
The deficit next year will be 6.0 percent, compared with Madrid's estimate of 4.5 percent, a European source said a day before the European Commission unveils its official forecasts for the bloc. In 2014, when the deficit was supposed to come in at 2.8 percent - under the EU ceiling of 3.0 percent - it will be still at 5.8 percent, the source said, leaving Spain in dangerous waters.
"This means that Spain finds itself with a real problem - it either gets another extension (to the timetable) agreed in June" or it will have to take additional austerity measures, the source said.
Total debt as a percentage of GDP is expected to be slightly better than government forecasts, at 83.7 percent in 2012 compared with 85.3 percent, and 89.5 percent next year rather than 90.5 percent, but again it is well over the 60 percent EU limit. For 2014, the EU puts Spain's total debt at 93.9 percent, charting a sharp deterioration. Madrid has not given an estimate for this figure. At the same time, the Spanish economy, already deep in recession, will contract 1.6 percent this year, the EU estimates, compared with Madrid's forecast for minus 1.5 percent.
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