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UPDATE 1-Ordonez says Spain has no more room for spending

Published 04/15/2009, 02:53 PM
Updated 04/15/2009, 02:56 PM

* Ordonez says switch to large budget deficit incredible

* Words clash with PM's readiness to spend more if needed

MADRID, April 15 (Reuters) - Spain has no more room to boost spending, the governor of the Bank of Spain said on Wednesday a day after Prime Minister Jose Luis Rodriguez Zapatero said his government was ready to use further fiscal measures if necessary.

A combination of lower tax income and hefty emergency spending will send Spain's public sector deficit to 8.3 percent of gross domestic product in 2009 and 8.7 percent in 2010, the Bank of Spain has forecast, after it enjoyed a 2 percent surplus in 2007.

"To move from a 2 percent surplus to our forecast of an 8 percent deficit, a swing of 10 percentage points, is incredible. It could make sense up to a point, but in my opinion there is no margin for (further) spending," Miguel Angel Fernandez Ordonez told the Spanish Congress.

His words appeared to clash with comments by Zapatero that the government's main aim was to maximise the effectiveness of a current stimulus package worth around 70 billion euros, "and to take new measures if necessary."

Zapatero fired Pedro Solbes as economy minister last week in the Socialist's first major cabinet reshuffle since winning 2004 elections. Solbes had publicly argued that further spending measures were unaffordable.

While the economy ministry under Solbes forecast a deficit of 5.8 percent this year, moving back towards the EU limit of 3 percent after that, Zapatero has said a deficit of up to 8 percent by 2011 was a figure "we could live with." (Reporting by Paul Day; Writing by Ben Harding; Editing by Jason Webb and James Dalgleish)

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