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Spain's already elevated deficit is running above targets.
European Union officials are investigating Spain's 2011 budget deficit after significantly higher than expected numbers emerged last month.
Officials have been in Madrid collecting information this week, Reuters reported.
Examinations of this type are common for euro zone countries with deficits above 3 percent of gross domestic product.
The policy "envisages fines for euro zone countries like Spain - unless the shortfall is reduced in line with recommendations from euro zone finance ministers," Reuters said.
EU officials have been studying whether Spain's new government may have misjudged this year's budget gap for political reasons, the news agency also reported.
Meanwhile, a Spanish official told Dow Jones the difference between Spanish projections and reported figures stems from an unexpected downward shift in the local economy. Excluding that impact, Spain would have been compliant with the deficit reduction it had promised EU officials it would achieve, that official said.
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Spain's deputy prime minister Soraya Saenz de Santamaria told reporters at a press conference that the Spanish government had given officials "as much information as we could, with the maximum transparency." She said the Spanish government had also shared with officials its plans to prevent such miscalculations in the future.
Spanish officials are characterizing the incident as a "misunderstanding" and told news agencies it expects conflicts to be cleared up.
Spain was to cut its deficit to 6 percent in 2011, but actual figures showed Spain's annual budget deficit stood at 8.5 percent of GDP in 2011.
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