Struggling Spain, reluctant to call for a debt bailout, faces slower growth and a much bigger public deficit than its government initially expected, according to new EU estimates seen by AFP Tuesday.
This year's public deficit -- the shortfall between government spending and revenues -- will come in at 8.0 percent of Gross Domestic Product, well above the target of 6.3 percent agreed with Brussels when Spain was given an extra year to put its strained finances in order.
The deficit next year will be 6.0 percent, compared with Madrid's estimate of 4.5 percent, a European source said a day before the European Commission unveils its official forecasts for the bloc.
In 2014, when the deficit was supposed to come in at 2.8 percent -- under the EU ceiling of 3.0 percent -- it will be still at 5.8 percent, the source said, leaving Spain in dangerous waters.
"This means that Spain finds itself with a real problem -- it either gets another extension (to the timetable) agreed in June" or it will have to take additional austerity measures, the source said.
Total debt as a percentage of GDP is expected to be slightly better than government forecasts, at 83.7 percent in 2012 compared with 85.3 percent, and 89.5 percent next year rather than 90.5 percent, but again it is well over the 60 percent EU limit.
For 2014, the EU puts Spain's total debt at 93.9 percent, charting a sharp deterioration. Madrid has not given an estimate for this figure.
At the same time, the Spanish economy, already deep in recession, will contract 1.6 percent this year, the EU estimates, compared with Madrid's forecast for minus 1.5 percent.
In 2013, the comparison is much worse, with the economy shrinking 1.5 percent compared with the government's forecast of minus 0.5 percent, while a recovery in 2014 should see Spain post growth of 0.5 percent, well short of Madrid's 1.2 percent estimate.
In May, the European Commission's estimates showed the Spanish economy shrinking just 0.3 percent, with the public deficit at 6.3 percent and total debt at 87 percent of GDP, all to be revised down, according to the European source.
Spanish Prime Minister Mariano Rajoy earlier Tuesday all but ruled out seeking a bailout in 2012 but vowed to do so if faced with persistent high borrowing costs as the government presses ahead with unpopular austerity policies.
Rajoy said Spain had nearly completed its fund raising on the financial markets for this year but it could still be forced to seek a bailout -- after Greece, Ireland and Portugal -- if it could only raise fresh money at very high rates.
"If we see that during a long period Spain is financing itself at very high prices then we would have to ask for it," he added.
Spanish borrowing costs have fallen sharply since the European Central Bank said in September it would intervene on the markets to force down borrowing costs if a eurozone state formally requested help from the bloc's new rescue fund, the European Stability Mechanism.