Fresh warning on size of Spanish deficit Spain's economy and competitiveness minister has warned the country's budget deficit could exceed even the dire target given just three days ago as he outlined plans for stabilising public finances and reforming the economy. The new centre-right government of Mariano Rajoy, Popular party prime minister, announced €15bn of emergency deficit-cutting measures on Friday and disclosed then that the deficit for last year would be about two full percentage points - or €20bn - higher than the 6 per cent target agreed with the European Union by the former Socialist government. But in an interview with radio station Cadena Ser on Monday, Luis de Guindos warned Spain's 2011 budget deficit may exceed 8 per cent of gross domestic product, which would give the country the third highest deficit in the eurozone behind Ireland and Greece. "It's possible we could exceed this 8 per cent [deficit] number," Mr de Guindos said, "although I hope it wouldn't be by much." Mr de Guindos said the new government had acted as quickly as possible to alert the public about the deterioration in the state of the public finances even though it was not a pleasant thing to have done. The initial emergency measures, which are expected to be followed by another €20bn of cuts to bring the deficit down to 4.4 per cent of GDP this year, included €8.9bn of public spending cuts and €6bn of tax rises. In some of Spain's autonomous regions the top marginal rate of personal income tax will rise to 56 per cent from 49 per cent. Following the rescue of eurozone members Greece, Ireland and Portugal by the EU and the International Monetary Fund, Italy and Spain are now under intense pressure in the sovereign bond markets to restore order to their public finances and make their economies more competitive. Some economists and politicians say they fear that too much austerity, even if it meets the requirements of the EU, will simply plunge the economy further into recession, thus shrinking GDP and making it even harder to meet the targeted deficit ratios. "The government's adjustment plan will probably lead to economic recession and from there to a deep economic depression, and therefore to the destruction of jobs," said Alfredo Pérez Rubalcaba, the parliamentary Socialist leader who was resoundingly defeated by Mr Rajoy in the general election in November. PP ministers agree that austerity alone would cause difficulties and say they will introduce radical reforms to the labour market in order to create jobs in a country where unemployment - at 5.4m or 23 per cent of the workforce - is by far the worst among large EU economies. "We have a very aggressive reformist agenda in many areas," Mr de Guindos said. If we apply only cuts and tax rises we would put ourselves in a recessionary situation ... We have to end the haemorrhaging of jobs - it's unacceptable.