Rajoy will prioritize public deficit, Europe and labor reform

The leader of the Popular Party government-in-waiting, Mariano Rajoy, has held "intensive" talks with European leaders on the euro-zone sovereign debt crisis in which he believes the European Central Bank has a key role to play, the PP's secretary general, María Dolores de Cospedal, said Monday.

Rajoy is, she said, against the euro zone being turned into a two-tier system of stronger and weaker members, and has made reducing the public deficit a priority.

"The four priorities of Rajoy are Europe, control of the public deficit - where Spain's credibility is at stake, and where there is no question of the PP not achieving the target - the health of the financial system and labor reform," Cospedal told a news conference after a meeting of the party's national committee.

Economy Minister Elena Salgado on Tuesday revealed that the country's regions had a combined deficit in the first nine months of the year of 1.19 percent, down from 1.2 percent in the first half. The target for the full year is 1.3 percent.

The OECD on Monday said it expected Spain to meet its target of reducing the deficit for all of the country's administrations from 9.3 percent to last year to six percent this year and to 4.4 percent the following year, despite slashing its GDP growth forecast for 2012 to 0.3 percent from 1.6 percent previously.

The PP won an absolute majority in the general elections held on November 20. Rajoy is expected to take over the reins of the government shortly before the Christmas holiday period. With the euro-zone crisis on the boil, Rajoy has been under intense pressure to reveal his plans.

However, the PP leader has kept a low profile, with his cards largely hidden. In a telegram congratulating him on his victory, German Chancellor Angela Merkel said Rajoy had a "clear mandate" to "rapidly" push through the reforms that both Spain and the European Union need.

Cospedal said Rajoy had held talks with some 20 international leaders, bankers and members of the financial and economic community and now planned to speed up his agenda with meetings with business leaders and labor unions.

Salgado said in the third quarter alone the country's 17 regions, which have gone on an austerity offensive, with cuts in some cases in education and healthcare spending, had managed to post a small surplus.

In the first nine months, spending by the regions fell by 2.8 percent, while non-financial revenues were down 3.0 percent.

Castilla-La Mancha, Murcia and Valencia headed the regions that had failed to meet their targets, with deficits of 4.8 percent, 3.0 percent and 2.3 percent respectively.

Salgado said the Economy Ministry would get in touch with those regions that had not met their targets to ask them how they plan to remedy the situation. "The central government will comply with its deficit target [of 4.5 percent of GDP], and the regions need to do so," she said.

The outgoing Socialist government does not plan to take additional measures to ensure the deficit is met, the minister said. "In my conversations with Mr Rajoy we have spoken about the need for the regions to meet their deficit objectives, but we have not spoken about concrete measures."