MADRID: Spain's central government deficit hit 1.20 percent of economic output in January, almost a third as big as the fiscal gap for all of 2012 and highlighting Madrid's struggle to show nervous markets it can get a grip on its finances.
The figures, posted on the Treasury Ministry web site late on Monday, show the central government had a budget shortfall of 12.7 billion euros ($16.5 billion) in January compared with 40.3 billion euros for the whole of 2012.
The higher January figure was partly due to a 112 percent jump in corporate tax rebates, according to figures from the Spanish tax office.
That item had fallen sharply in December, helping to lower the 2012 deficit but adding to pressure on what looks like being a difficult 2013.
Tax rebates to individuals also jumped in January, up 176.3 percent year on year compared to a fall of 53.9 percent in December.
The central government deficit, which does not include the accounts for Spain's 17 autonomous regions or the social security system, was 0.89 percent in January 2012. It was 3.84 percent of GDP in the whole of 2012, beating a target of 4.5 percent.
Spain is under intense market pressure to show investors it can deflate one of the highest public deficits in the euro zone, and has introduced a range of unpopular tax hikes and spending cuts.
It would not be correct to come to conclusions regarding the full-year 2013 deficit figure based on the January data because tax income and costs are unevenly distributed through the year, a treasury spokesman said.
The central government's lower-than-expected shortfall last year helped the Prime Minister Mariano Rajoy announce an overall public deficit of 6.7 percent of GDP for 2012, only marginally higher than a target agreed with the European Commission.
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Since the deficit reduction was on the right path, Rajoy has said the government will not need to pass austerity measures this year and can instead concentrate on structural reforms to stimulate growth in an economy deep in recession.
"What worries me is that it gives the feeling that we don't need to make any more adjustments, and we do, especially in social security," said Jose Carlos Diez, economist at Madrid-based brokerage Intermoney.
The social security system registered a deficit of almost 1 percent of GDP last year due to higher pension and unemployment benefit payments compared to an original target of a balanced budget.
"It's absurd, because (the government) is trying to negotiate the stability programme and are going to have to go to Brussels with these first quarter figures, which are going to be very bad," Diez said.
Spain is expected to get more time to cut its deficit to below 3 percent of GDP.
That target is currently set for 2014, but with recession hitting most of Europe, the European Commission has turned its focus to structural deficit targets which strip out the effects of the business cycle and is now insisting that Spain show consistent progress on reducing structural costs.
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