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IMF chief backs Spain’s two-year delay | Updated: 9:09:47 AM, Tuesday April 30, 2013

International Monetary Fund chief Christine Lagarde is offering robust support for Spain’s call for two more years to meet its European Union deficit target.

‘I strongly support the Spanish government’s objectives of restoring a sound fiscal position while securing a recovery and creating jobs,’ Lagarde said in a statement on Friday.

‘Today’s announcement to pursue a more gradual consolidation path is a welcome step toward meeting these goals, building on major reforms and structural fiscal improvements last year,’ she said.

‘We are looking forward to discussing the measures underpinning the new strategy’ during the IMF’s early-June economic review of Spain.

The European Commission earlier in the day approved the Spanish government’s plan to put off until 2016 achieving the eurozone’s public deficit limit of three per cent of gross domestic product.

The EU executive body called Spain’s fiscal plan a ‘balanced – but still ambitious – fiscal consolidation path, given the difficult economic environment’.

In an about-face from calls for greater austerity to fight the debt and banking crises in the eurozone, Lagarde, the IMF managing director, and other IMF officials in recent months have been urging authorities to focus on stimulus measures to offset weak growth.

According to the latest IMF forecasts, the Spanish economy – the eurozone’s fourth-largest – will contract by 1.6 per cent this year and grow by 0.7 per cent in 2014.

Struggling in a double-dip recession sparked by the collapse of a decade-long property boom in 2008, Spain has been under tight EU surveillance since 2009.

The IMF has supported the EU recapitalisation and reform program for Spain’s embattled banking sector with technical assistance and monitoring.

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