Spain will take until 2017 to meet the European Commission's budget deficit target of 3 percent of gross domestic product (GDP), the country revealed on Friday.
The country's Economy Minister Luis de Guindos said new deficit numbers had been agreed with the European Commission.
Under the plan, Spain's deficit will reach 6.3 percent of GDP in 2013, instead of 4.5 percent, as agreed previously.
The deficit will then slowly decline to 5.5 percent in 2014, 4.1 percent in 2015 and 2.7 percent in 2016, Reuters reported on Friday.
"Spain has, to all intents and purposes, thrown in the towel on fiscal austerity. The scale of the government's revisions to the country's GDP and budget deficit targets underscore the extent to which front-loaded fiscal retrenchment has exacerbated Spain's economic downturn and become self-defeating," Nicholas Spiro, managing director of Spiro Sovereign Strategy, said.
Spain cut its GDP forecast for 2013 to a contraction of 1.3 percent from a contraction of 0.5 percent previously. The economy is then forecasted to grow by 0.5 percent in 2014 and 0.9 percent in 2015.
"This is a belated acknowledgement on the part of the Rajoy government that its macroeconomic policies have failed. A laser-like focus on growth-enhancing measures is now needed to help extricate Spain from its crisis," Spiro added.