Spain Announces ‘Most Austere’ Budget Cuts Since 1977
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
With the aim of saving 27 billion euros ($36 billion) in 2012, the Spanish government has announced almost 17 percent in budget cuts, a budget that the government says is the ‘most austere’ since the country became a democracy in 1977.
Despite violent demonstrations and protests that took place in major cities across Spain, the Spanish government insisted that the cuts were vital to avoid financial ruin.
With the aim of saving 27 billion euros ($36 billion) in 2012, the Spanish government has announced almost 17 percent in budget cuts, a budget that the government says is the ‘most austere’ since the country became a democracy in 1977.
Despite violent demonstrations and protests that took place in major cities across Spain, the Spanish government insisted that the cuts were vital to avoid financial ruin.
While the public was relieved that there would be no rise in the VAT or further pension and unemployment benefit cuts, electricity and gas bill will rise by 7 percent and 5 percent respectively from April. At the same time, state-sector salaries will remain frozen this year.
According to energy minister Jose Manuel Soria, costly energy subsidies were adding to Spain’s massive debt woes.
With the cuts, Spain’s finance minister Cristobal Montoro said he is confident that Spain would meet its deficit targets of 5.3 percent by 2012, down from 8.5 percent in 2011.
Related: Spain Economic Statistics and Indicators
Montoro said:
[quote] Our ultimate goal will be to meet the 3 percent deficit by 2013. We are in a critical situation that has forced us to respond with the most austere budget of the Spanish democracy. [/quote]
Of the 27 billion euros of savings, the government said that 12.3 billion euros would be raised in new taxes, with 5.3 billion euros coming from corporate tax adjustments, and 2.5 billion euros coming from a temporary amnesty on unpaid taxes in the black market.
The Spanish government, which is not yet 100 days old, is tasked with keeping the country out of financial trouble. Yet, unemployment rate is currently at 24 percent and other estimations show that the economy is already in recession and is expected to contract by 2 percent this year.
Since the government of Mariano Rajoy took office in December, it has already announced a provisional budget that included 9 billion euros in annual spending cuts and 6 billion euros in tax increases.
Yet, it has come under fierce criticism for failing to address other pressing issues like job creation and economic revival.
Related Story: Europe’s Policy Problem: Balancing Austerity With Economic Growth
Related Story: Remedies For An Ailing Economy – How To Avert A Crisis: Nouriel Roubini
Related News: Spain’s High-End Escorts Go On Strike – By Withholding Sex – Against Bankers
Related News: Spanish Town Wants To Grow Marijuana To Pay Off Debt
