Spain promised Monday to meet its tough deficit reduction targets despite a surprise last-minute deterioration in its 2011 accounts and signs of a prolonged recession.

Economy Minister Luis de Guindos said the conservative government's austerity drive will compensate for the revision, released Friday, which it blamed on the big spending regions.

On Friday the government revised its 2011 public deficit to the equivalent of 8.9 percent of gross domestic product, up from 8.5 percent previously reported.

The new figures, blamed on
higher-than-expected deficits in regional governments, complicate the government's task of lowering the shortfall to 5.3 percent of GDP this year and 3.0 percent of GDP next year.

The Spanish government outlined a 27.3-billion-euro (35-billion-euro) austerity drive in its 2012 budget and in addition asked regions to slash 10 billion euros from their education and health care budgets.

"The agreed adjustment compensates for this deviation and will reach the 5.3 percent," De Guindos told reporters at an economic forum.

"We are building the foundations for correcting the imbalances of the Spanish economy, we are building the foundations for a future recovery," the minister said.

De Guindos rejected the "false debate" between austerity and growth that is gripping European Union nations, many of which are calling for a greater focus on stimulating economic activity.

The minister predicted, however, that Spain's recession will last until at least mid-2012.

"The second quarter will show a fairly similar performance to that of the first quarter," he told journalists.

Spain has returned to recession with economic output contracting by 0.3 percent in the first quarter of 2012 after shrinking at the same pace in the last quarter of 2011, official data shows.

The government has forecast that the economy will shrink by 1.7 percent over the year.

"Spain is living through a difficult moment but it has a government that knows what must be done," De Guindos said.

channelnewsasia.com