Spanish Reform Measures Beating Targets
January 25th, 2011
Spain is beating its own deficit-reduction targets in the clearest sign to date that its reform efforts are paying off, the government said today.
According to advance data from the finance ministry, the central government’s 2010 budget deficit was equal to 5.1% of gross domestic product, ahead of its 5.9% target, and down from 9.4% of GDP in 2009.
Finance Minister Elena Salgado said this result meant Spain would “comfortably” meet its target of an overall public sector deficit.
A 10.9% rise in 2010 tax revenue, compared with a forecast increase of 8.1% has helped figures thanks in part to the VAT hike to 18% and eliminating certain tax rebate.
The data signalled a further easing of market doubts about Spain’s fiscal prospects, which have ratcheted down significantly with the government’s plan to recapitalise the country’s savings bank sector.
The government’s new plan to shore up its banks appeared to pay dividends with a sharp drop of yields at in today’s treasury auction of short-term debt.
It’s evident that banking reform and deficit reduction are boosting investor confidence in Spain. “To a large extent market doubts have now disappeared,” Salgado said.
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