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
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