Summary Box: Spain tests Europe's austerity logic

AP News
Posted: Mar 12, 2012 5:08 PM
Summary Box: Spain tests Europe's austerity logic

THE PAIN IN SPAIN: After the 17 euro countries spent much of the past two years tightening their rules against overspending, Spain's high deficit is testing the currency union's dedication to austerity as the way out of the financial crisis.

THE ISSUE: Prime Minister Mariano Rajoy earlier this month said Spain would run a deficit of 5.8 percent of economic output this year, far above the 4.4 percent it had promised. He said Spain would bring its deficit down to 3 percent by 2013 _ and thereby back in line with EU rules.

FORCING A QUICK CURE?: Economists say budget cuts risk causing more harm than good. But a decision to avoid brutal cuts this year threatens to undermine the eurozone's efforts to convince investors that it can prevent countries from running up excessive debts.