Fears Spain’s GDP deficit could exceed 8% forecast

SPAIN’s public deficit for 2011 may be higher than the 8% of GDP forecast by the new government, the country’s economy minister said — fuelling fears the country faces a prolonged period of tight budgets and economic contraction.

Spain had originally targeted a 2011 deficit of 6% of GDP, but the newly elected conservatives said last Friday that the deficit would be 8%.

It said it would now have to work hard to hit this year’s tough deficit-reduction goals in an economy seen as tipping back into recession this quarter, and announced new tax rises and spending cuts.