Spanish Prime Minister Mariano Rajoy: Pledged to reduce deficits
The newly elected Spanish government has outlined €8.9 billion in spending cuts and tax rises to reduce the country's borrowing, as a part of the foreseen austerity measures, which should total €16.5bn in 2012.
Spain finished 2011 with a deficit of around 8% of its GDP, significantly higher than the 6% seen a year ago.
The government of Prime Minister Mariano Rajoy pledged to reduce Spain's public deficit to 4.4% of GDP in 2012. His Deputy Prime Minister Soraya Saenz de Santamaria confirmed that public sector wages will remain frozen for another year and ruled out any hiring in public administration.
"This is the beginning of the beginning," Saenz de Santamaria said and added that Spain is facing “an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures". She underlined that the wealthiest will be increasingly taxed for at least two years, resulting in expected budgetary gains of €6bn.
The announced austerity measures sparked protests across the country whose economy has shrunk since 2008, and is struggling to overcome the highest unemployment rate in the EU of 21%.
Vice President of the European Commission in charge of Economic and Monetary Affairs Olli Rehn expressed his regret over the sizeable fiscal slippage regarding the 2011 budgetary target and welcomed the commitment of the new government to the fiscal consolidation and correcting its excessive deficit by 2013 as scheduled.
Rehn stressed that “this consolidation package is sizeable and a very important step to shore up public finances and reassure financial markets through measures concerning inter alia taxes and the reform of public administration”.
Rehn announced that the Commission will carry out a detailed assessment of the increased deficit slippage and failures of the previous government to meet the fiscal targets, as well as of the budgetary impact of the new austerity package.
“This set of measures gives a much needed signal to underline the new government's determination to bring back the correction of the excessive deficit to the envisaged path within the deadline of 2013,” Commissioner said and added that the announced structural reform measures, “in particular for the labour market and the financial sector, are essential to reinforce the credibility of the Spanish economy and to return to a sustainable growth path”.
The centre-right government led by Mariano Rajoy took over from the socialists of José Luis Rodríguez Zapatero on 21 December 2011 after a historic landslide victory in general elections.
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