The recent deductions in Spain budget 2012 are an effort to maintain the trust of the leading players in the various markets that have been badly affected by the sovereign debt situation in Greece. Spain has a high level of budgetary deficits and it is struggling in sectors like economic growth, banking and unemployment as well.
Highlights of Spain Budget 2012:
The targeted reduction in public expenditure for 2012 fiscal is 3.8 percent, which is significantly lower than the 7 percent deduction rate that was aimed at 2011 fiscal.
It is expected that this reduction would save 6.1 to 8.5 billion euros.
Spain is aiming at keeping its expenses between 117 and117.35 billion Euros, which is lesser than the expenditure for 2011 fiscal by 4.7 billion Euros.
Spain is looking to limit its budget deficit to 6 percent of the Gross Domestic Product in 2011 fiscal.
It is aiming to narrow it down to 4 percent in 2012, 3 percent in 2013 fiscal and further down to 2.1 percent in 2014 fiscal.
It is expected that in 2011 fiscal Spain s economy will increase by 1.3 percent and by 2.3 percent in 2012 fiscal.
These projections are higher than the popular economic forecasts.
Spain Budget: Expectations and Reactions:
Spain has introduced several austerity measures in the 2012 budget and this has prompted many protesters to demonstrate against the government. The situation has been further fueled by the high rates of unemployment across the country.
Experts are opining that the Spanish Socialist Workers Party or PSOE will require the assistance of other parties so that the budget can be approved in such a scenario.
Majority of the semi-autonomous regions in Spain have been facing high levels of debt and, as per economic analysts, they could hinder the center s efforts to reduce the deficit.
Moody Investors Service has stated in a report that the national government might face difficulties in reducing their deficit as they have been unable to restrict expenses in areas like Catalonia.
Moody has further stated that there is a lot of possibility that Spain will further adjust its deficit reduction targets to an achievable level but this is going to be a short term policy.
Meanwhile Spanish investors have been calling for a risk premium the debt markets too, are seeing gradual increase in costs. Experts are of the opinion that Spain s ability to achieve its debt reduction targets may be hampered by such sentiment in the financial markets.
The International Monetary Fund has also stated that Spain might not be able to meet its deficit targets because of the inability of the regional governments to adhere to the prescribed targets for deficit reduction.
The IMF has advised Spain to put in place some extra measures that will help it to meet medium term deficit cutting targets. According to experts, through its reduced expenses Spain is trying its best to achieve some economic growth.
Analysts feel that the major challenge for Spain will be adhere to its deficit reduction targets, because otherwise its situation will be similar