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Brussels suspects Rajoy government inflated last year’s deficit figure

Administration denies report it wanted to make 2012 performance seem better

EC unhappy at no deficit-reduction action ahead of Andalusia elections

The Spanish government on Tuesday categorically denied it had deliberately inflated the public deficit last year in order to make its target for this year look better.

The administration was reacting to a report by Reuters, which quoted sources familiar with the situation, that the European Union is also likely to take action against the Popular Party government of Prime Minister Mariano Rajoy for delaying taking further austerity action to reduce the deficit ahead of the regional elections next month in Andalusia, in which the opinion polls point to a first ever victory for the PP over the Socialist Party in that region.

Reuters quoted one official as saying it is “likely” that Brussels will adopt sanctions against Madrid. “It is not that we want to. But if there is a deviation, and it’s almost inevitable, then we have to,” the source said.

“It’s speculation. It’s misleading information,” Reuters quoted a government spokeswoman as saying.

The official deficit figures are not due out until next month. Shortly after the PP took office in December, a number of government officials said the outgoing Socialist government had overshot its deficit target for last year of 6 percent of GDP by a full two percentage points. The government used this argument to justify a package of further spending cuts and an increase in personal income tax worth 15 billion euros. The government’s official target for GDP this year is 4.4 percent of GDP, but members of Rajoy’s economic team have expressed hopes that Europe will cut Spain some slack in meeting the target.

In response to the Reuters report, Spanish radio station Cadena Ser quoted the European Commission’s spokesman for economic and monetary affairs, Amadeu Altafaj, as saying the EC could not comment on the figures as they had not yet been published.