Spain seems to be doing its best to steal a couple of headlines from Greece. Why? Well, according to sources quoted by Reuters, the European Commission suspects that the newly elected centre-right government led by Mariano Rajoy (pictured) might have inflated Spain's deficit figures for 2011 - potentially a pretty harmless exercise, given that the new cabinet only took office before last Christmas, meaning most of the blame for failing to meet the deficit reduction targets will fall on its predecessor anyway.
The alleged move was aimed at making figures for the current year look better by making last year's look worse. It's no secret that Rajoy and his ministers are longing for the Commission (and Germany) to agree to revise Spain's deficit reduction targets. Spain is expected to bring its deficit down from 6% to 4.4% of GDP by the end of this year. The problem is that, as Rajoy's government claimed, Spain's deficit at the end of 2011 was around 8% of GDP - i.e. around 2% above the target. Add that Spain's growth forecasts have further deteriorated over the past few months, and it becomes clear that there's virtually no chance of the 4.4% target being met.
The likely motivation for such a move would be the hope that having a higher starting point for this year's deficit could improve the case for softening Spain's deficit targets, while also allowing the government to look good when they make substantial progress in closing the gap. After all, the Commission would know that an extra 1% of deficit-to-GDP to be cut means an extra €10 billion that needs to be found by the end of the year.
However, despite the Commission trying to play down rumours as usual, Spain now risks being fined if the suspicions are confirmed.
A country manipulating its statistics would by no means by news for the euro crisis - Greece could actually give its partners one or two tips on how to make figures 'fit for purpose'. This is all quite speculative still, but if confirmed, these reports could seriously damage the reputation of the centre-right Spanish government, at home and abroad.