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Spain's central bank warns of cost of political impasse

MADRID – Spain’s central bank has warned that the political impasse in the country could have negative economic effects.

The warning came Thursday as the bank revised up its 2016 economic growth forecast for Spain to 3.2 per cent from 2.8 per cent, and maintained estimates for the subsequent two years at 2.3 per cent and 2.1 per cent.

The bank said a prolonged period of interim government would delay necessary reforms. Acting conservative Prime Minister Mariano Rajoy has headed a caretaker government since December following two inconclusive elections. If there is no government by Oct. 31, a third election will be called.

The bank also said Spain’s budget deficits this year and next would be 4.9 per cent and 3.6 per cent of annual GDP — above levels agreed with the European Union.