French Fin Min : Wise To Delay Spain's Deficit Targets
07/09/2012| 10:07pm US/Eastern
By William Horobin
BRUSSELS--French finance minister Pierre Moscovici said Tuesday it was "wise" to extend the calendar for Spain to meet deficit targets, warning that sticking on the previous track would have brutal consequences for the country's economy.
Euro-zone finance ministers agreed here in Brussels to delay Spain's targets to allow it to run a deficit of up to 6.3% of gross domestic product this year instead of 4.8%. Next year's target will be 4.5%, and the target in 2014 will be 2.8%.
"This decision was taken easily," Mr. Moscovici said. "I think it is a wise decision because things would otherwise have become impossible, or so brutal that it would have been impossible," he said.
Mr. Moscovici also said France favors a retroactive application of rules for Spain's bank bailout. That would mean loans disbursed via the Spanish state would later be modified so as to go directly to banks without weighing on Spain's public finances.
"We have pleaded for retroactivity," Mr. Moscovici said, noting that it was implicit in his response that the question should be decided on by the end of July.
EU leaders agreed at a summit at the end of June to allow the currency bloc's bailout mechanism to recapitalize banks directly, rather than channeling funds through states as is the case at present.
But before that can happen, the euro zone will need to implement a unified banking supervision mechanism, while Spain could receive 30 billion euros for its banks as soon as the end of this month.
The French finance minister said it seems the euro zone is on track to adopt a unified supervisor at the end of the year, after which direct recapitalization of banks will "follow quickly."
-Write to William Horobin at email@example.com
Corrections & Amplifications
The article was corrected at 0224 GMT. The original misstated Spain's deficit target for this year in the second paragraph. Spain will be allowed to run a deficit of up to 6.3% of gross domestic product, not 6.2%.