Spain said today that its budget deficit for 2011 has come in at 8.5% of GDP, even worse than the new conservative government's own already pessimistic prediction.

The increase is likely to ratchet up the pressure on the government to take enact more austerity measures to get the deficit down to the stated goal of 4.4% of GDP for this year, unless it gets some relief from the EU in the form of an easier 2012 target.

The previous Socialist government had said the deficit would come in at around 6%.

After taking power in December, the conservatives raised the forecast to about 8%.

The deficit includes revenue and spending by the central government and that of Spain's 17 regions.

The Spanish government recently denied a news report that it had exaggerated its unofficial estimate of the 2011 deficit so as to improve its chances of getting easier terms from the European Union.

Finance Minister Cristobal Montoro said today's figures showed that the government was "not exaggerating".

The centre-right Popular Party took power in December after scoring a landslide win in November elections as Spaniards fed up with what is now a near 23% jobless rate punished the previous Socialist government.

The new government has said it will present a new full-blown 2012 budget by the end of March and Spaniards can almost certainly expect some degree of fresh pain.

The government has already enacted a 15 billion euro package of spending cuts and income tax hikes, even though the economy shrank in the fourth quarter and is forecast to do so in this quarter too. That would drag Spain back into a technical recession, defined as two consecutive quarters of negative growth. It only just limped out of one in 2010.

A much bigger austerity package is expected if the government is forced to stick to the 4.4% goal for the deficit for 2012.