Spain has appealed to Brussels for softer deficit-reduction targets, raising fears that Europe’s rescue strategies are unworkable in the bigger eurozone economies and not just Greece.
Prime minister Mariano Rajoy has reportedly asked European officials to raise Spain’s debt reduction target to 5pc, claiming that reducing it to 4.4pc will be impossible.
The ongoing damage of the debt crisis – and the German-led austerity drive – could be laid bare on Thursday if the European Commission (EC) unveils a wholesale revision of the eurozone’s growth forecasts, as expected. Experts said the EC is preparing to cut its growth forecasts following the radical spending cuts, tax increases and job losses across Europe.
The figures could force politicians to revise the deficit targets and strict budgetary rules in the fiscal pact just agreed by the European Union.
Spain’s finance minister Luis de Guindos told reporters that his country’s request to lift its debt targets would not stand out as unusual because there would be a “general reconsideration of targets across the whole of the EU”.
An official said that Spain and other countries may want to use the economic data to get their targets reduced but Brussels was “unlikely” to give in to changes so soon.
“So, although the current program has failed miserably and can be expected to continue to fail in the foreseeable future, there is considerable uncertainty regarding the effects of either choice. And for political leaders, it may be easier to accept the troika’s program as though –as the European authorities and most of the media frame it – there is no choice. But, the idea that default/exit would be a catastrophe on the order of a Great Depression is false.
The Great Depression was not the result of any one-time event; it was a long series of bad policy”