On the same day as Spain’s Economy Minister De Guindos announced new economic forecasts, which for some were completely off-the-wall, the government also announced that it will give civil servants back half of their extra payment which was suspended in 2012, worth over 550 million euros.
The government raised its public deficit forecast for 2016 to 3.6% of GDP from a previous 2.8% and to 2.9% from 1.4% for 2017. It will send these new estimates to the European Commission (EC) for its approval.
Rajoy’s caretaker government made a decision on both of these issues two weeks after the EC embarrassed it for once again failing to comply with its deficit commitment. This had really annoyed the community executive as well as its commissioner for Economic and Financial Affairs Pierre Moscovici.
The EC had hoped to start negotiations with the Spanish government in May, in the unlikely event that Spain had a new government in place by then, and it was looking for a severe correction in its spending policy with the aim of reaching the 3% deficit target. But by then Rajoy’s government had opted out with two announcements which Brussels interpreted as provocative. This further undermined the Spanish government’s standing. Its reputation for being unsupportive and unreliable has already been well and truly cemented.
*Image: Flickr /European People’s Party