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Imf Urges More "credible" Fiscal Targets In Spain

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Spain's fiscal consolidation plan is ambitious but based on potentially optimistic economic projections and targets should be made more credible, the International Monetary Fund said on Friday.

In its annual review of the Spanish economy, the IMF said Spain's recovery from a deep recession would be "fragile and weak". It projected the economy will remain in recession this year, with gross domestic product shrinking by 0.4 percent, before growth resumes at a tepid 0.6 percent next year, rising to 1.7 percent in 2012.

The government sees the economy contracting 0.3 percent this year before returning to growth of 1.3 percent in 2011.

The Fund said Spain's fiscal consolidation plan was correctly front-loaded, with nearly two-thirds of the needed adjustment achieved by 2011.

"But the envisaged adjustment is based on potentially optimistic macroeconomic projections," IMF staff added.

Based on policies already announced, IMF staff projected that the fiscal deficit will decline to 9.3 percent of gross domestic product in 2010, in line with the government's target.

However, next year IMF staff see the deficit reduced to 7 percent of GDP, which is one percent of GDP above the government's target.

"The differences arise from staff's less buoyant macroeconomic projections, which are also subject to significant downside risk," it added.


I presume it's relating to this report here.

At least the IMF is seeing growth for Spain, anyone know what level of growth Spain needs to lower unemployment?

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