Spain gov’t tightens screws on austerity

Spain gov’t tightens screws on austerity

MADRID - Agence France-Presse
Spain’s government unveiled on Sept. 26 a 2013 budget that tightens austerity even in the face of growing protests, easing the path to a widely expected sovereign bailout.

The 2013 budget rakes in 39 billion euros ($50 billion) in spending cuts and tax increases so as to curb the public deficit despite a recession, a jobless rate of nearly 25 percent and soaring debt repayments.

Only old-age pensioners were spared in the slew of cuts, aimed at ensuring Spain complies with its commitment to the European Union to get the public deficit under control.

“It is a budget for a period of crisis, but aimed at getting out of this crisis,” Deputy Prime Minister Soraya Saenz de Santamaria told reporters after a cabinet meeting.

Defying market scepticism, Madrid vowed to slash the deficit from a blowout figure of 8.9 percent of economic output last year to 6.3 percent this year, 4.5 percent in 2013 and 2.8 percent in 2014.

“It is a major commitment to reducing the public deficit but also oriented towards economic growth and creating employment” Budget Minister Cristobal Montoro told journalists.

The focus is on spending cuts, the government said.

Expenditure by ministries is lowered by 8.9 percent, public sector salaries are frozen for the third year running and the regions, which pay for health and education, must find seven billion euros in savings.

But retirement pensions are expected to go up by one percent, sticking to a key pre-election promise of Prime Minister Mariano Rajoy’s conservative government.

One other big item going up next year, however, is the cost of servicing Spain’s public debt: interest payments are forecast to leap 33.8 percent to 38.6 billion euros.

With nearly 25 percent of the workforce jobless, social security spending accounts for nearly two thirds of the nation’s expenditure.