Spain to miss budget targets, says IMF

Demonstrators crowd Cibeles Square during a general strike in March 2012 in Madrid. Labour market reforms have provoked widespread protests

Spain is likely to miss its budget targets for this year and Madrid should adopt wider reforms to reduce its debts, according to the International Monetary Fund (IMF).

Spain is implementing drastic spending cuts to try to slash its budget deficit to 5.3% from 8.5% in 2011.

Many economists said the target was always unrealistic.

Last weekend, Spain was given 100bn euros ($125bn; £80bn) in emergency loans to help its struggling banks.

Austerity drive

The IMF said Spain needed to raise revenue from taxes, and look at further spending cuts. However, it added that Madrid should not look to cut its deficit too quickly given "an unprecedented double-dip recession with unemployment already high".

Spain has the highest unemployment rate in the eurozone, with almost one in four workers out of a job.

Earlier this year, the government announced 27bn euros of cuts from its budget as part of one of the toughest austerity drives in the country's history.

Changes included freezing unemployment benefits and public sector workers' salaries, slashing departmental budgets and increasing tax on large companies.

But the spending cuts and tax rises have undermined the economic recovery in Spain. The country is back in recession and its banks are severely under-capitalised given the collapse in the Spanish property market.

The 100bn-euro bailout has failed to restore confidence in the country's economy, with the interest rate, or yield, paid on government bonds traded in the secondary market hitting 7% on Thursday, a level widely seen as unsustainable.

Bond yields in the secondary market are seen as a good indication of investor's confidence in a government's ability to repay its debts.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories



  • Two sphinxes guarding the entrance to the tombTomb mystery

    Secrets of ancient burial site keep Greeks guessing

  • The chequeBig gamble

    How does it feel to bet £900,000 on the Scottish referendum?

  • Tattooed person using tabletRogue ink

    People who lost their jobs because of their tattoos

  • Deepika PadukoneBeauty and a tweet

    Bollywood cleavage row shows India's 'crass' side

  • Relief sculpture of MithrasRoman puzzle

    How to put London's mysterious underground temple back together

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.