Spain to seek softer deficit target with EU: source

(MADRID) - Crisis-hit Spain wants the European Union to ease the country's 2013 deficit target to around 6.0 percent of economic output from the original target of 4.5 percent, a government source said Tuesday.

Madrid also wants the European Union to agree to give Spain an extra year to bring its deficit to below the bloc's maximum threshold of 3.0 percent of gross domestic product, the source added.

"It will be in that range," the source said when asked about Spanish media reports that Spain was seeking to ease its deficit target for 2013 to 6.0 percent.

Spain is expected to present its Stability Programme for 2013-16 -- an outline of how it will comply with European budgetary rules which will include deficit and economic growth forecasts -- to the EU next month.

Last week the country posted a 2012 public deficit of 7.0 percent, up from the 6.7 percent figure for the year it originally announced in February and above the 6.3 percent target it agreed with the EU.

Spain recorded a public deficit of 9.4 percent in 2011.

The government's original deficit target of 4.5 percent in 2013 and 2.8 percent in 2014 are considered unrealistic by most analysts.

The Spanish economy, the eurozone's fourth biggest, contracted by 1.4 percent last year, the second worst yearly slump since 1970, and the Bank of Spain predicted last week that it will shrink by 1.5 percent this year before posting a "modest rebound" in 2014 with growth of 0.6 percent.

Prime Minister Mariano Rajoy's conservative government had predicted output would contract by a more modest figure of 0.5 percent this year and grow by 1.2 percent in 2014 but last month it said it would have to revise its forecast.

El Pais reported Friday that the government's new forecast saw the economy contracting by 1.0 percent this year but the government source declined to "confirm any figure".