Spain has just announced that it, like France, will miss its deficit target this year. Its deficit is now 6 percent of GDP, far from the target of 4.5 percent. The EU is now debating relaxing Spain’s terms, but it’s unclear exactly what they have in mind, as the FT reports:
The European Commission had signalled that it was ready to give Madrid more time to meet its budget targets, but Brussels has yet to set a new ceiling or decide how much longer Spain will have to bring its wayward budget back into line. Under the current agreement, Spain must reduce its deficit to below 3 per cent of GDP in 2014 – a goal that is already in effect out of reach.
It has been clear from the beginning that Spain, already suffering through a grueling recession, would have difficulty making these cuts without gutting its economy further. With unemployment at 26.3 percent and growth estimated at -1.5 percent, public pressure is mounting for the government to give up on austerity entirely and work on the economy instead. It’s hard to see how this will move Spain toward meeting its target in 2014.It’s almost as if the EU has no policy at all and is simply lurching hopelessly from one failure to the next. It would be darkly funny if millions of people weren’t losing their livelihoods because of the epic policy disaster that is the European monetary union.