Inspectors from the European Commission have been in Spain to evaluate its 2011 budget deficit after the numbers came in much higher than expected, the Commission said today.
Spain said at the end of February that its budget deficit was 8.5 per cent last year, far above the Commission's expectation of 6.0 per cent.
Madrid also said it would not meet its target for this year of 4.4 percent, saying the deficit would be 5.8 per cent.
"Technicians of the European Commission have been in Madrid this week to collect information on the (2011) public accounts," said Amadeu Altafaj, the Commission's spokesman on economic and monetary affairs.
"It is a normal practice in all countries under an excessive deficit procedure," he added.
The EU's recently sharpened excessive deficit procedure starts when a country has a deficit higher than 3 per cent of gross domestic product. It envisages fines for euro zone countries like Spain - unless the shortfall is reduced in line with recommendations from euro zone finance ministers.
The recommendation was for a reduction to 4.4 per cent this year, but Spain's economic growth forecasts when the recommendation was made were much more optimistic than now.
Spain's defiance over the pace of reduction of the deficit will therefore be the first test of how the new EU budget rules will be applied. Faced with a similar possibility of overshooting deficit targets, another euro zone country, Belgium, cut spending to make sure of meeting the goals.
The Spanish deficit number has yet to be confirmed by the European Union's statistics office Eurostat in an official publication in April, before the Commission can make any decisions on whether Spain should be allowed more flexibility.
Commission president Jose Manuel Barroso has said he believed Spain would present a 2012 budget fully in line with EU budget rules.
Officials in Brussels insist Spain must present a budget based on the 4.4 per cent target and that there will be no room for discussions on relaxing it until May.
If the target could not be reached because of worse than expected growth, the Commission could accept the worse outcome, but the effort to meet it would first need to be made, one euro zone official has said.
Reuters
