Spain’s central bank warned the government on Tuesday, the country’s rising budget deficit could put pressure on any recovery and that the measures taken involving government spending have exhausted their limit. The central bank sees the budget deficit reaching 10 per cent of GDP by 2010.

“Any chance of using fiscal policy to increase spending has now been exhausted,” said central bank governor Miguel Angel Fernandez Ordoñez.

The central bank also pointed out the danger which unemployment poses to an economic recovery.

Fernandez Ordonez, said failure by governments to rein in spending and by central banks to drain excess liquidity from banking systems could “put the global economy at the edge of a depressive spiral of grave consequences.”

Bank of Spain Web site: www.bde.es

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