Spain's conservative government predicted last year that it would reduce its deficit to 4.2 percent in 2015 and then to 2.8 percent in 2016 - forecasts that EU finance commissioner Pierre Moscovici said were "a bit optimistic".
"The budget deficit was lowered in 2015 to 5.16 percent from 5.8 percent. It is therefore a new reduction of Spain's public deficit, but it is insufficient," Montoro told a news conference.
The deficit overshoot, one of the highest in the European Union, could raise pressure on Spain's acting government to adopt painnful new austerity measures.
The ruling Popular Party (PP) passed deep and unpopular budget cuts during their four-year term in an effort to closely stick to deficit targets and allay market concerns over Spain's accounts.
The cuts in health and education generated social unrest and contributed to growing levels of inequality and acting Prime Minister Mairano Rajoy eased some of the austerity last year ahead of a December 20 election, and reduced taxes.
Rajoy in February predicted the deficit would come in at 4.5 percent in 2015 and indicated he would ask Brussels for leeway in reducing the country's deficit.
Eurozone rules dictate that governments must narrow budget deficits to within 3.0 percent of economic output, or face fines although none have ever been applied despite consistent breaches.
Since the Stability and Growth Pact came about in 1998 to strengthen the monitoring of budgets, 25 of the EU's 28 members have overstepped the deficit limit. Sweden, Estonia and Luxembourg are the only countries that have never breached it.