The Spanish government Saturday said the effort to clean up an ailing banking system will have a big impact on its finances, widening its budget gap and increasing its debt load.

Budget Minister Cristobal Montoro said the government forecasts its budget deficit will stand at 7.4% of gross domestic product this year. Excluding the impact of measures to help banks to digest a massive pile of toxic real-estate assets, he said Spain will comply with the deficit target of 6.3% of GDP for 2012 it has committed to with the European Union.

The new budget projections come at a time of uncertainty about the country's solvency amid soaring borrowing costs. Many analysts expect the government's effort to lower a budget gap to below the 3%-of-GDP limit for EU countries by 2014 to go off track also because of a deep recession that is pushing the unemployment rate to a record high of almost 25%.

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Filed under: * Economics, Politics • Economy • Consumer/consumer spending • Corporations/Corporate Life • Credit Markets • Currency Markets • Euro • European Central Bank • Housing/Real Estate Market • Labor/Labor Unions/Labor Market • The Banking System/Sector • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • Foreign Relations • Politics in General • * International News & Commentary • Europe • --European Sovereign Debt Crisis of 2010 • Spain

1. jkc1945 wrote: “Bread and circuses” always ends up the same way. . . . September 30, 6:48 pm | [comment link]

2. AnglicanFirst wrote: The European countries that have voted for unrealistic and unsustainable social programs under any political-economic system are being forced to face the reality that there is no money and will be no money to pay for their ‘pipe dreams.’ We, the USA, are ‘well down’ the same track. October 1, 9:56 am | [comment link]

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