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UPDATE 1-Spain, Eurogroup aim for more realistic deficit cuts

* IMF sees Spain's deficit at 7 percent of GDP in 2012

* Economy minister vows to avoid hitting that level

(Recasts; adds more quotes, background)

By Robin Emmott

LUXEMBOURG, Oct 9 (Reuters) - Euro zone finance ministersbelieve that Spain's budget cuts should take into account itsweak economy, Spain's economy minister said on Tuesday, addingMadrid would work to limit economic recession.

The International Monetary Fund forecast late on Monday thatSpain will miss its deficit targets in 2012 and 2013 as theeconomic contraction next year will be much bigger than theSpanish government has forecast.

"There was a positive evaluation (by euro zone financeministers of Spain's 2013 budget on Monday), of Spain's economicpolicy and the need to carry out a fiscal adjustment that issensitive to the economic situation in the country," Luis deGuindos told reporters at a European Union finance ministers'meeting in Luxembourg.

The IMF said in its fiscal monitor report that the country'sdeficit would reach 7 percent of GDP in 2012 and 5.7 percent in2013, compared with European Union-agreed targets of 6.3 percentof GDP this year and 4.5 percent of GDP next year.

"The only thing I can say (about the IMF's forecasts forSpain) is to try to avoid that they happen," de Guindos said.

"Logically, we are working on the basis that such negativeforecasts are not met," he said.

The government has based its budget plan for next year on arecession of 0.5 percent while the IMF forecast a recession of1.3 percent in the country in 2013 after a 1.5 percentcontraction in 2012.

Asked if euro zone finance ministers pressed Spain for morebudget deficit cuts on Monday night to make sure the targetsagreed with the European Union are met, de Guindos said: "No,absolutely not."

The IMF also said that Spain's debt will jump to more than90 percent of gross domestic product in 2013 as the countryrecapitalises its banking sector , but de Guindosagain played down the forecasts.

"More than the projection, which is important, is to see howwe are closing the Spanish macroeconomic imbalances."

Asked if the Spanish government would ask for financial aidfrom the euro zone, de Guindos said:

"At this moment, the Spanish government will continue withreforms, continue with cutting the public deficit and after thatdissipate all the doubts that exist about the future of the eurozone."

(Reporting by Robin Emmott, writing by Jan Strupczewski;editing by John O'Donnell)

((jan.strupczewski@thomsonreuters.com)(+32 2 287 68 37)(ReutersMessaging: jan.strupczewski.reuters.com@reuters.net))

Keywords: SPAIN CONSOLIDATION/