Spain – The Next Greece?
- July 12th, 2012
- Posted by EUEditor
The Spanish Prime Minister Mariano Rajoy has announced further austerity measures in an attempt to help the struggling country repay its burgeoning debts.
TIGHTENING THE NOOSE
Prime Minister Rajoy announced, 11.7.12, a three percentage point increase to the value-added tax, or VAT, in Spain, cuts to bonuses for public servants, and a 10 per cent cut to payments for the long-term unemployed in a speech to the Spanish parliament in Madrid today.
The move comes only a day after European Finance Ministers unanimously adopted a revised recommendation to Spain for the correction of its successive deficits.
Spain was offered a lifeline for its troubled banking sector in the form of a €30-billion (A$36-billion; xe.com, 12.7.12) bailout package but there are concerns that further austerity measures will aggravate the recession in the country.
European Commission spokesperson Simon O’Connor, talking to journalists in Brussels today, welcomed the move.
“It is an important step to ensure the fiscal targets for this year are met,†he said.
“Prime Minister Rajoy has clearly indicated in his speech to parliament that his government intends to follow the country-specific recommendations put forward by the [European] Commission.â€
Under the plan, Spain must agree to allow EU inspectors to investigate bailed out banks, and investors from the private sector will take a hit.
“We will work on the principle that private sector participation in the distribution of losses is necessary … to ensure that taxpayers do not have shoulder an unfair burden in this process,†Mr O’Connor said.
“Burden sharing with the private sector also reduces the debt burden on the sovereign, and as such is consistent with our strategy of working to break the link between banks and sovereign risk.â€
The funding is the first batch of a rescue packages which could cost as much as €100-billion (A$120-billion).
FRESH DEMONSTRATIONS IN SPAIN
At the same time, police clashed with thousands of demonstrators in Madrid, as public discontent grows over the austerity measures in Spain, where over 50% of young people are without work.
The demonstrators had joined coal miners staging a long walk from Northern Spain protesting cuts to subsidies.
Patrick Wright
Pictures Twitter: @jalbertAMV; Flickr: contando-estrelas