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Tuesday, March 12, 2013 6:52 PM

Spain's Budget Deficit Grew by 35.4% in January to 1.2% of GDP; Spain's Tax Revenue Drops 20% in Face of VAT Hikes

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Here's a story you can expect to see in the Wall Street Journal or Financial Times tomorrow. You can read it here today.

Via Google Translate, El Economista reports Spain's Budget Deficit Grew by 35.4% in January to 1.2% of GDP.

The government deficit in terms of national accounts in January reached 12.729 billion euros, equivalent to 1.2% of GDP, representing an increase of 35.4% over January 2012.

According to the budget execution data published in January by the Ministry of Finance website, the cash deficit in January came to 15,252,000, which are the result of a fall in net income of 37% (5.789 billion) and a expenses increased by 15.4% (21.041 billion).

Tax revenues fell 20% to 10.608 billion, among other causes by the accumulation of returns earlier this year, says Finance.

Negative Indirect Tax Collection

In fact, the state's revenue from indirect taxes (VAT and special) was negative at EUR 1.647 billion as a result of increased returns, but maintaining the territorial government had total revenues of 1.530 billion, 29.1% less.

The corporate tax revenue has also resulted in negative returns by 1.131 billion. Revenue from direct taxes (income and companies) fell by 18.2% to 9.078 billion.

In the item of expenditure, there was notable increase of 23.3% from the payment of the interest on the debt, which rose from 6.250 billion in January 2012 to 7.709 billion euros in January 2013. There was also a 10.4% increase in payments by current transfers to 9.474 billion.

Within these transfers, Social Security payments grew by 40.2% (2.334 billion), mainly due to the state budget for 2013 makes a greater contribution to the minimum pension supplements.

In the first month of the year, the central government deficit reached 0.89%. The state deficit target for 2013 is 3.8% of GDP, while the target for the total deficit of Public Administration is 4.5% from 6.7% in 2012, as recently reported by the Ministry of Finance.

Spain must cut its budget deficit to 2.8% in 2014, but it is expected that the European Commission extended the deadline for compliance with this commitment.


  • Spain's budget deficit for the month of January was 0.89% not counting regional deficits. 
  • The target for the entire year is 3.8% of GDP. 
  • On that basis, Spain went through 23.42% of its annual budget in a single month.
  • Spain's deficit target including regions and transfer payment is 4.5% of GDP.
  • The deficit including regions and transfer payments was 1.2% of GDP.
  • On that basis, Spain blew 26.67 % of its budget in a single month.
  • Territorial government revenues declined 29.1%
  • Income Tax revenue (corporate + personal) fell 18.2%
  • Social Security payments grew by 40.2%
  • Overall transfer payments increased 23.3%

Odds of Success Zero Percent

Odds Spain hits its budget target of 4.5% in 2013 is precisely 0.00%.

I believe we have an answer to the question I asked earlier today: Offer You Cannot Refuse; EU Passes Law Forcing Countries to Take Bailout; Is Spain the First Target?

Mike "Mish" Shedlock

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