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Spain parliament approves 2012 austerity budget

MADRID, Spain - Spain’s parliament gave final approval Thursday to a 2012 budget that foresees a record 27 billion euros in austerity measures to slash the public deficit.

Prime Minister Mariano Rajoy’s ruling conservative Popular Party used its outright majority to approve a series of amendments from the Senate, thus clearing the tight-fisted budget.

Budget Minister Cristobal Montero said the budget was a “guarantee” that Spain would meet its target of axing the public deficit to 5.3 percent of economic output this year from 8.9 percent last year.

To achieve the goal, the central government would have to contain its deficit to 3.5 percent of output, regional governments to 1.5 percent and municipalities to 0.3 percent.

However, Spain’s economy is in a recession with unemployment at 24.4 percent, complicating the deficit task as tax income is constrained and expenses mount for items like jobless benefits.

The International Monetary Fund cast doubt over the 2012 goal in a report on Spain’s economy this month, saying it “will likely be missed” despite considerable efforts.

IMF staff projected Spain’s deficit would “significantly overshoot targets and fall only gradually over the medium term,” it said, warning that revenue to the state may be weaker than expected.

The Fund said Spain had lost credibility last year by missing its target of reducing the deficit to 6.0 percent of output. This was exacerbated, it said, by Spain insisting all was well until almost the end of the year.