Spain Granted Time To Comply With EU Budget Rules

After the latest Greece bailout, Europe's attention has turned to Spain, which has been breaking European Union spending rules for years. But the Spanish government has now caved to pressure to lower its deficit.

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RENEE MONTAGNE, HOST:

And after the latest financial bailout of Greece, Europe is now worried more about Spain. That country has also been overspending for years, in violation of EU budget rules.

To look at the implications, Lauren Frayer brings us this report from Madrid.

LAUREN FRAYER, BYLINE: Before the ink was dry on a new European fiscal pact, Spain was already asking for a pass. Its deficit last year was nearly triple what EU rules allow.

Finance ministers meeting in Brussels this week appear to have begrudgingly granted Spain another year to comply - in exchange for severe budget cuts. The question here in Madrid, is how deep those cuts will go.

Health, education and job security provisions have already been cut, sending thousands of Spaniards into street protests last weekend. One in four Spaniards is out of work. But besides strife at home, this row over Spain's deficit could lead other ailing nations to reconsider just how steadfast EU budget rules really are.

Juan Jose Toribio is an economist at Spain's IESE Business School.

JUAN JOSE TORIBIO: The main difficulty would come from other countries of the Union, because they also will feel entitled to renegotiate. And this is something the European Union cannot accept.

FRAYER: Sure enough, Austria's finance minister said yesterday, that if Spain can get an extension, why can't Hungary? Hungary's deficit was actually within EU limits last year. But finance ministers have voted to suspend EU development funds for the country, because it's on track to overspend next year. Both Spain and Hungary are test cases for how Europe deals with repeat offenders and whether it's even possible to find a blanket policy.

For NPR News, I'm Lauren Frayer in Madrid.

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