European leaders are testing the latest version of their debt crisis strategy in Spain, granting Prime Minister Mariano Rajoy more time to reduce the budget deficit in exchange for deeper spending cuts.
Rajoy yesterday announced 65 billion euros ($80 billion) of austerity measures in a renewed effort to meet European Union budget targets after he was granted a one-year extension on the deadline to meet EU limits.
With the extra year, Spain has until 2014 to bring its deficit within the EU’s 3 percent limit. European finance ministers agreed to loosen the 2012 deficit goal to 6.3 percent of GDP from 5.3 percent. Still, ministers urged Spain to step up budget cuts.