MADRID - Spain's Prime Minister Mariano Rajoy has conceded that the government just failed to reduce its budget deficit in 2012 to the level it promised European authorities.

He says the deficit fell to 6.7 per cent of the country's annual gross domestic product from 9 per cent in 2011.

The reduction, which came after a raft of spending cuts and tax increases, is just above the 6.3 per cent Spain promised European authorities.

Rajoy's deficit figure does not take into account the €40 billion ($52 billion) bailout granted to ailing Spanish banks by Spain's partners in the 17-country eurozone. Including the bailout, the deficit would be higher. The executive European Commission has allowed Spain not to count the bailout.

Spain is in its second recession in three years and has 26 per cent unemployment.