across-the-board personal income tax rebate of EUR 400, worth a total of around EUR 6 billion.

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The Finance Department on Wednesday reported that the public surplus shrank to EUR 3.280 billion in the first quarter, or 0.29 percent of GDP. The surplus in the first quarter of last year was EUR 6.747 billion, equivalent to 0.64 percent of GDP.
The government's coffers are starting to feel the effects of a sharp slowdown in the economy as the housing market moves from boom to crisis.
Spain posted a surplus of 1.83 percent of GDP last year when the economy grew 3.8 percent. That was surpassed in size among countries in the euro zone only by Finland. The government was initially forecasting a surplus of 1 percent of GDP for this year when it estimated the economy would grow by 3.1 percent.However, the administration has finally bowed to the inevitable and will shortly announce revised growth figures. Economy Minister Pedro Solbes said Tuesday that the new GDP estimate is likely to be in line with that of the Bank of Spain, which recently cut its forecast to 2.4 percent from 3.1 percent. The International Monetary Fund sees activity increasing by only 1.8 percent this year.Commenting on the latest budget figures, the secretary of state for finance, Carlos Ocaña, said the government is now looking at a surplus for this year of 0.4 percent of GDP.
The administration recently approved an economic stimulus package worth some EUR 10 billion, which it expects will add between 0.2 and 0.3 percent to GDP growth this year. The package includes an across-the-board personal income tax rebate of EUR 400, worth a total of around EUR 6 billion.Ocaña insisted that the tax rebate would not result in the government posting a deficit in 2008.The Finance Department attributed the narrowing of the surplus in March to lower value added tax receipts due to the slowdown in the housing market and to higher oil prices. VAT revenues fell 5.7 percent to EUR 19.355 billion. New home sales carry a VAT rate of 7 percent. House sales fell 27 percent in January, the latest available official figure. Total revenues in March climbed 1.3 percent to EUR 38.298 billion.Outlays in the first quarter rose 12.8 percent to EUR 35.022 billion, with financial costs up 14.6 percent.