Madrid will bring down its public deficit in 2019 despite ongoing concerns that the minority government will implement some populist measures, the economy minister told CNBC on Monday.
The European Commission sent a letter to Spain, earlier this month, warning that the structural deficit reduction planned for 2019 was 0.25 percent below what the country had previously agreed to.
However, Nadia Calviño, Spain's economy minister, told CNBC Monday that the government remains committed to reducing public deficit.
"We have not reduced the ambition in terms of reduction of the public deficit," Calviño told CNBC's "Squawk Box Europe".
"This year, the expectation was to have 2.2 percent (public deficit), but actually when we took office in June, we did an internal study and we realize that we are going to be close to 2.7 percent. So our ambition is to decrease deficit between this year and next year by 0.9 points," she said.
Perhaps one of the most surprising measures of the 2019 budget plan was a 22 percent increase in the minimum wage to 900 euros a month ($1024). Calviño explained to CNBC that there has been a decrease in real wages that needs to be tackled. At the same time, the minister also said that "this measure cannot be seen in isolation," given that the budget plan also includes steps to support small to medium-size companies.
Spain is forecasting a Gross Domestic Product (GDP) growth of 2.6 percent this year and 2.3 percent in 2019 – above the EU's average.
The current government in Madrid took power in June after a no confidence vote ousted the previous centre-right party. The now Socialist-led executive has been relying on other parties to pass through legislation.
The budget for 2019 is therefore a contentious issue, given that Prime Minister Pedro Sanchez needs more than his party's support to keep the country working.
"I don't think it is impossible to find agreements with these political parties," Calviño told CNBC about more radical parties such as the leftist Podemos.
"The fact of the matter is that since we came to the government…almost 5 months ago now… we have been able to pass a significant amount of laws despite the minority number of seats," she said.
The European Commission is still assessing the Spanish budget, as it is the case for the budgets of all euro zone countries, and will publish it at some point next month.