Spain's public deficit to the end of September, including the central government, regions and social security, but not the town halls, rose to 3.44 percent of economic output from 3.39 percent a month earlier, the Treasury Minister said on Tuesday. The Spanish government says it is on track to meet a Brussels-agreed public deficit of 4.2 percent of gross domestic product this year, down from 5.8 percent in 2014.
"The target of 4.2 percent is what we want and we're on the right path to reach it ... it's perfectly doable," Treasury Minister Cristobal Colon said during a conference to detail the government accounts. Spain was under intense pressure during the worst of the 2008-2013 crisis to reduce one of the biggest budget shortfalls in the European Union as investors threatened to flee if the country couldn't control its finances.
As the economy has returned to strength - output is expected to grow over 3 percent this year - the conservative ruling People's Party (PP) has partially reversed harsh and unpopular austerity measures. The European Commission has warned that Spain risks missing this year's and next year's deficit target, but with a December 20 election looming, Spanish leaders have insisted that strong tax revenue from a growing economy will offset over-spending.
Prime Minister Mariano Rajoy said on Tuesday that, if the PP wins the election, he would cut taxes further on the back of the economic recovery. Under EU rules, Madrid has to bring its headline budget deficit below the EU threshold of 3 percent of gross domestic product next year, cutting it to 2.8 percent. Spain was listed amongst the four European countries likely to miss next year's deficit target on Monday, though the European Commission is likely to wait until a new government sends in a revised 2016 budget proposal before taking any steps.
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