Via Reuters:

(Reuters) – Spain’s public deficit for 2011 may be higher than the 8 percent of GDP forecast by the new government, the economy minister said Monday, fuelling fears the country faces a prolonged period of tight budgets and economic contraction.
Spain had originally targeted a 2011 deficit of 6 percent of gross domestic product, but the newly elected conservatives said Friday the deficit would be 8 percent. It said it would now have to work hard to hit this year’s tough deficit-reduction goals in an economy seen tipping back into recession this quarter and announced new tax rises and spending cuts.
“We’ll need to see, but it’s possible that we have gone over the 8 percent mark, though (we) expect that it hasn’t done so by much,” Economy Minister Luis de Guindos said during an interview with Cadena Ser radio, his first since taking the post after the conservatives won the November election.
Friday’s announcement that the deficit would be as high as 8 percent of GDP has reignited market concerns about the financing needs of indebted euro zone countries and put downward pressure on the euro, which hit a decade low versus the yen Monday…The austerity measures announced last week are the first of many, Deputy Prime Minister Soraya Saenz de Santamaria said. The government must find savings worth more than 35 billion euros in 2012 to meet its deficit goal of 4.4 percent of GDP.
“With these measures, we’re not very optimistic on the growth prospects for this year. We expect the economy to contract by more than 2 percent, but it all depends on financing costs,” economist at Citi Jose Luis Martinez said.
“If the deficit-cutting measures change the market perception, the economic contraction could be less. If not, probably more.”

The problem is that market perception is most unlikely to change in a favorable direction, because these measures can do nothing to address the other deadweight dragging Spain down: the euro, the currency it should have never adopted.

And meanwhile:

The debt crisis and concerns over the health of Spain’s accounts has closed bond markets to all but a few Spanish companies and banks, causing bank loans to dry up and making financing impossible for small and medium-sized companies.

That doesn’t sound like a recipe for recovery to me.