Spain's social security to have 10.5 billion euro deficit in 2012

Spain's social security system is set to register a deficit of 10.5 billion euros in 2012 compared to an initial forecast of a balanced budget, according to a document sent to the European statistics office Eurostat by the Treasury Ministry.

The new social security figures cast more doubt about the capacity of the government to update pensions payments in line with inflation, a move expected in November which may cost up to 5 billion euros ($6.5 billion).

However, Treasury Minister Cristobal Montoro said on Tuesday the change would not have any impact on the country's overall deficit because the central government would take steps to reduce spending accordingly.

Spain's public deficit is set to reach 7.3 percent of gross domestic product this year, including one-off capital injections into ailing banks worth about 1 percent of GDP.

(Reporting by Julien Toyer; Editing by Alison Williams)