Spanish PM Promises Austerity in 2010
January 5th, 2010
Spain’s government will present an austerity plan by the end of January to help cut the public deficit to 3 percent of gross domestic product by 2013, Prime Minister Jose Luis Rodriguez Zapatero said on Wednesday.
Spain’s public deficit is expected to reach 9.5 percent of GDP this year and the European Commission has given the government three years to bring it back in line with the bloc’s deficit ceiling.
“We must fix the deficit and we will fix the deficit, and we will meet our commitment of 3 percent by 2013 as the market and the Commission has asked,” Zapatero said.
“We need policies of moderation … but public spending is very decentralised and all the regional governments must take part in any austerity plan. The government will be the first with a very demanding plan. Regional governments must follow.”
Zapatero, whose government on Wednesday said it had approved a 1.5 percent rise in the minimum wage for next year, declined to give details of the plan and said the government must first sit down with the opposition to hammer out a joint agreement.
Some 50 percent of public spending is controlled by local autonomous regions and the government has said cutting the deficit would depend on co-operation from the local governments.
In 2008, the regional deficit stood at 1.49 percent of GDP, double the 0.75 percent of GDP agreed upon with the central government, with only seven of the seventeen regions meeting the cap.
The Socialist government’s 2010 budget proposal aims to cut the deficit to 8.1 percent of GDP through a hike in value-added tax, the scrapping of a 400-euro ($573.6) tax rebate and reduced spending.
Ratings agency Standard & Poor’s this month revised its credit outlook on Spain to negative and warned that the country risked a debt downgrade in two years if the government did not take tough action to reduce its fiscal and economic imbalances.
Spain would be able to create jobs during the latter half of 2010 as the economy returns to growth, Zapatero said.
“The Spanish economy is in a moment of transition from recession to recovery which will be confirmed in 2010 and, we hope, will generate net jobs in the last part of the year,” Zapatero said.
Over one million workers have lost their jobs through 2009, half of them from the battered Spanish property sector, Zapatero noted. Over 60 percent of layoffs, though, were in the first four months of the year, and the combination of a multi-billion euro stimulus plan and an easing in the severity of the recession has helped slow job losses in the second half.
“The trend has been a moderation in the rate of job losses in the last few months and we expect that to continue in the early part of 2010,” Zapatero said.
The Economy Minister said on Tuesday the jobless rate is likely to rise at a significantly lower rate in December than the same month last year.
Spain will need more than a couple of years to find jobs for all those who have been laid off since the beginning of the economic crisis, European monetary affairs commissioner Joaquin Almunia said during an interview on Radio Ser on Wednesday.
“(Spain) won’t be able to absorb the lost jobs within two years; it will take longer than that,” Almunia said.
Story from Forexyard
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