Spain: A record austerity budget
30 March 2012
Writing on the day the Mariano Rajoy government brought in the 2012 budget and on the day after the general strike against the cuts and the labour market reforms, El País calls the developments a “historical adjustment”. In answer to the call of the main unions, the UGT and CCOO, hundreds of thousands of people gathered in Spain’s cities. For the Madrid daily, the budget intends to “clear up a good deal of the unknowns in a diabolical equation: how to cut €35 billion [revised down by the government to €27.3bn euros on 30 March] from the public deficit – from 8.5 percent to 5.3 percent of GDP – in a recession?”
The cuts will affect spending in all jurisdictions. Ministries will see their budgets reduced by at least 17 percent on average compared to 2011 (at least 10 billion euros), and officials will have their salaries frozen for the second year in a row.
In total, the central government is to cut 17.5 billion euros from its deficit, the regions 15.6 billion, and the municipalities one billion. The social sector is also being affected, as Social Security is to save around one billion euros.
Added to this are new tax revenues: getting rid of tax deductions for companies and bringing higher VAT for certain goods and services. For El País, “the goal seems to be within reach, but the recession complicates everything” –
The question is whether the cuts have reached their limit. If this is the case, radical changes in the administrative structure should be undertaken. We must also compensate for the increase in spending caused by the interest payments on the public debt [...] The key to success remains in how we spread the burden.