MADRID: Spain will leave it to Brussels to decide if an expected recession warrants an easing of the country's budget deficit targets for this year, its treasury minister said in an interview published on Sunday.
Spain has said it is committed to cutting its deficit to 4.4 percent of economic output in 2012, even though its 2011 deficit soared to an estimated 8.2 percent of GDP, well above a 6 percent target, and there are few prospects of growth.
"We have to be realistic. As the IMF has said, the scenario has changed and the government is waiting for Brussels to change (its target) too and adapt it to the situation," Cristobal Montoro told newspaper La Vanguardia.
He said that when Brussels set the 4.4 percent deficit target for Spain, the economy was forecast to grow 2.3 percent.
"In that scenario there would have been more tax revenue, but in a situation of recession, tax revenue is going to fall again," Montoro said.
The IMF expects Spain's economy to shrink this year and next, according to a draft of the World Economic Outlook (WEO) quoted on Thursday by Italian news agency ANSA.
On Friday, a German newspaper suggested Montoro had cast doubt on the 4.4 percent target, but Deputy Prime Minister Soraya Saenz de Santamaria used Friday's weekly cabinet news conference to insist Spain will meet the target.
Spain, having moved away from the sharp end of the euro zone debt crisis in recent months, is wary of sending any negative message to the markets.
The centre-right government, which was elected by a landslide in November, is expected to announce sweeping economic reforms in coming weeks and will announce a new budget before March 30.
Montoro said the budget will include fresh efforts to reduce the public deficit, but ruled out any increase in VAT tax or special taxes. "We're not going to hurt the weakest social layers because not only is it unfair it also strangles the economy even further," he said.
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