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UPDATE 1-COVID spending drives up Spain's Jan-July public deficit

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Sept 30 (Reuters) - Heavy public spending and lower government revenues triggered a sharp rise in Spain’s public deficit for the seven months to July, the Budget Ministry said on Wednesday.

The deficit figure - including central government, social security and regions but not including town halls - surged to 6.53% of GDP from 1.96% a year ago, the ministry said.

It marks the widest deficit since the 7% full-year figure recorded in 2013, but remains far below the 11% reached in 2010 in the wake of the global financial crisis.

An income reduction of 6.8%, or 17.25 billion euros ($20.23 billion), coupled with a spending increase of 11.3%, or 31.43 billion euros, led to the sharp rise.

Government spending increased after the nationwide lockdown from mid-March to late June, which entailed approximately 22.82 billion euros in expenses, according to ministry figures.

Given the government’s huge financial needs and planned stimulus, Budget Minister Maria Jesus Montero said the government will suspend regulations on administrations building up deficits in 2020 and 2021.

However, she added the government will maintain a long-term objective of balancing its books.

“The Spanish government is not giving up on the principle of budget stability,” she told reporters on Wednesday. ($1 = 0.8543 euros) (Reporting by Aida Pelaez-Fernandez and Inti Landauro; Editing by Nathan Allen and Andrew Cawthorne)

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