Spain

European finance ministers agreed to suspend European Union funds destined for Hungary because of its failure to hit budget targets while, under pressure from other euro-zone governments, Spain agreed to deeper budget cuts than it had planned for this year, The Wall Street Journal reported. The two developments on Tuesday are signs of how the tougher policing of government budgets introduced since the onset of the sovereign-debt crisis is likely to generate tensions within the EU.

Eurozone finance ministers called on Spain to make new cuts in its 2012 budget to reduce its deficit by another 0.5 per cent of economic output, a stinging rebuke to the new government of premier Mariano Rajoy, which publicly flouted Brussels-imposed deficit targets less than two weeks ago, the Financial Times reported. Despite the new cuts, Madrid will still be allowed to breach a previously agreed deficit limit of 4.4 per cent of gross domestic product this year by nearly a full percentage point; its new target will be 5.3 per cent, according to a senior eurozone official.

In the years of economic crisis since the collapse of Lehman Brothers in 2008, Spanish leaders have always been able to boast to nervous investors that Spain’s public debt burden – however bad its annual budget deficits – is smaller than Germany’s and well below the European Union average, the Financial Times reported. Economists, business executives and even government officials, however, have started to sound the alarm about the rapid and unsustainable growth of the country’s public debt.

Spain's centre-right government moved today to head off any potential rebellion by the country's 17 autonomous regions over cost-cutting measures that are key to retaining credibility with its euro zone peers and financial markets, the Irish Times reported. Finance minister Cristobal Montoro was scheduled to meet with the financial heads from all of the regions later today to drive home the message of austerity.

The euro's tough new German-penned economic rulebook will be immediately tested by spiralling budget deficits in the Netherlands and Spain, raising the prospect of swingeing fines on the two countries, it emerged at an EU summit, The Guardian reported. As eurozone leaders finally launched a second, €130bn (£108bn) bailout of Greece, EU chiefs, with the exception of David Cameron and the Czech prime minister, prepared to sign the new rulebook – the fiscal pact – on Friday morning. The rules are the main part of an attempt to get the eurozone's soaring debt levels under control.

French presidential front-runner François Hollande said taxpayers earning over €1 million ($1.35 million) a year would be subjected to a special 75% tax bracket should he be elected, underscoring heightened interest across Europe in raising taxes on the wealthiest individuals, The Wall Street Journal reported. Speaking on French television late Monday, the Socialist candidate lamented the "considerable increase" in French corporate executives' pay, which he put at €2 million a year on average. "How can we accept that?" asked Mr. Hollande.

The Spanish government said Monday it missed its 2011 budget-deficit target by a wide margin, highlighting the difficulties in closing one of the euro zone's largest budget gaps as the country's economy entered a new downturn, The Wall Street Journal reported. The Spanish budget ministry said Spain's total public-sector budget deficit stood at 8.51% of gross domestic product last year, above the 8% estimate the new government of Prime Minister Mariano Rajoy gave in December. Spain had been aiming for a budget deficit equal to 6% of GDP in 2011.

Spain's jobless claims shot up 4% in January from December to 4.59 million, a sign that the euro zone's fourth-largest economy is still shedding jobs at a record rate, The Wall Street Journal reported. All sectors posted more claims but the rise was sharpest for services at 5.1%. In construction, weighed down by a four-year property slump, the number of residents registered as job seekers rose 2.1%. Compared with the same period a year ago, overall claims rose 8%.

Banco Santander of Spain announced on Tuesday that its net profit fell nearly 98 percent, to 47 million euros, during the final three months of last year, as the bank dealt with the downturn in the Spanish real estate market and the European debt crisis, The New York Times DealBook blog reported. The drop in quarterly profit weighed on the bank’s annual earnings, which fell 35 percent, to 5.35 billion euros ($7 billion), in 2011.

A new downturn for the Spanish economy has led to a sharp escalation of its unemployment rate, data showed Friday, lending new urgency to Prime Minister Mariano Rajoy's plans to overhaul one of the region's largest ailing economies, The Wall Street Journal reported. According to Spain's National Statistics Institute, the number of jobless Spaniards rose by 295,300 in the fourth quarter from the third, to 5.27 million. That is equal to 22.85% of the work force, compared with 21.52%, more than twice the average unemployment rate of 10% for the 27 members of the European Union.