Spain is expected to announce tomorrow the deepest round of austerity needed to meet public deficit targets; however, recession is on the doors and further austerity might weigh sharply on growth. Therefore, eyes will be tracking the announcement of budget tomorrow, hopeful Mariano Rajoy will find a way around to balance between growth and cuts.

The Prime Minister previously was able to lower the deficit target set by the European Commission, which has set a target of 5.9% as a start but then was forced to soften the pressures on Spain, which has initially targeted 4.4% of cuts this year.

Spain missed the budget targets in 2011, reporting a shortfall of 8.5% of GDP; however, the Spanish Premier already said that the government will pass a very, very austere budget this year, with projected cuts of 35 billion euros.