By Sarah White and Carlos Ruano
MADRID (Reuters) - Spain's next government seems certain to be hamstrung by tough spending restrictions after the country missed its 2015 public deficit target by almost a full percentage point, far more than expected.
Months of fruitless coalition talks following inconclusive national elections in December have left it in political limbo, and on Thursday public finances also took a turn for the worse.
The deficit reached 5.16 percent of economic output, the acting treasury ministry said, well beyond the 4.2 percent target agreed with the European Commission and the 4.8 percent Brussels had forecast.
Economic Affairs Commissioner Pierre Moscovici said in a statement the data confirmed the EU executive's concerns about Spain's finances, which it would assess fully in May.
Spain's acting government is hoping to persuade Brussels it can get close to the 2016 deficit target of 2.8 percent via stricter controls on regional finances and by leveraging a strong economic recovery.
Acting Economy Minister Luis de Guindos told reporters in Paris that 2016's budget, passed last year by the center-right People's Party (PP), would not otherwise need amending.
But to hit the target, the next administration will have to find savings of around 25 billion euros this year, according to Reuters calculations, possibly in the form of unpopular tax hikes or social spending cuts.
Barclays (LON:BARC) said in a note it expected Spain's 2016 deficit to reach 3.8 percent, again one point wider than targeted.
"Whoever leads the next government will have to deal with the inescapable reality of further fiscal consolidation," added Antonio Barroso, economist at Teneo Intelligence.
"The Commission will probably be much more aggressive once a new administration is in place."
The unpromising state of coalition negotiations suggests that seems unlikely before a second national election takes place, probably in June.
LESS LEEWAY?
The 2015 miss also makes it harder for Spain to get leeway on the tough 2016 goal -- a stance advocated by parties currently in talks over forming a government including the Socialists, leftist Podemos ("We Can") and centrist Ciudadanos ("Citizens").
Caretaker Prime Minister Mariano Rajoy signaled in February he was also open to asking Europe for flexibility on the deficit target, and de Guindos did not rule out such a move on Thursday, saying the deficit miss opened up a period of discussion with the Commission.
"It's bad news," said Daniel Fuentes, economist at think tank AFI. "They'll get to Brussels... facing questions on whether they're making enough of an effort."
The miss is a blow for the acting PP government, perceived as the party with the firmest grasp on the economy, which assured voters in the run-up to the election Spain would come close to hitting the target.
Government finances were pushed over the limit by over-spending by regional governments, especially the eastern regions of Catalonia and Valencia, and one-off costs such as a national health bill to treat hepatitis C patients, Acting Treasury Minister Cristobal Montoro told a news conference.
Spain has whittled down the deficit since a financial crisis, after the PP wielded deep spending cuts. But the PP also brought in tax cuts before the election, and the government failed to keep within yearly limits established by Brussels throughout its term.
Including international financial aid from a 2012 banking bailout, the 2015 deficit came to 5.24 percent, confirming data from the National Statistics Institute.