Opposition parties have slammed the right-wing government’s tax and spending plans for 2012 with the radical United Left party seeing them as demonstrating ’intolerance’ towards the majority’ and a ‘give-away’ for a ‘privileged few’.
The administration of Mariano Rajoy, elected last November in a landslide victory against the Socialists, revealed Tuesday details of one of the most draconian budgets anywhere in the West in recent times.
The government said it would make savings of €27 billion for the rest of 2012 from the central government budget, equivalent to around 2.5% of gross domestic product (GDP). The figure includes tax rises and spending cuts of around €15 billion announced in December.
Adding in cuts to regional authorities, the total cuts amount to €42 billion, putting the cuts package as deeper than even those passed or planned in Greece, Portugal and Ireland, the country’s that were ‘bailed out’ the IMF-EU-ECB Troika.
Spending is to be cut by 16.9% across Spain’s ministries: education spending will be slashed by 22% with 37% cuts to pre-school and primary school budgets and 11% reduction in grants and other support to students; culture axed by 15%; health will be reduced by 6.8%; and social services axed by 6%.
Among those budgets that also faced sharp reductions are government employment schemes with €1.6 billion savings to be made and the public sector pay bill, as wages will be frozen.
Ordinary Spaniards, struggling with a wages squeeze and record 5 million unemployment, will also face a rise in electricity bills of 7% and of gas bills by 5% from this month.
Spain’s Royal Family got off lightly however, with just 2% reduction in budget, as did the Church that will face tiny cuts, maintaining huge subsidies worth as much as €11 billion annually via direct aid, exemptions from property taxation and other financial support.
Tax dodgers and mafia types, were also among the winners in this budget, as they will benefit from a tax amnesty whereby they wlll be able to anonymously declare previously illegally hidden capital on which they will pay a bargain 8-10% rate.
And despite some modifications to taxation that will increase an estimated corporation tax receipts by 22% this year, large companies will continue paying corporation tax of just 16.3%, compared to 20% for small companies and to 22% income tax.
The budget made no calls on banks despite them bringing the country to its knees with reckless lending that led to a housing boom and bust. The banking system recently received very generous government subsidies to assist in a merger and takeover process involving the struggling Cajas, the local savings banks most exposed to the now zombie property market. (Spanish banks have also swallowed billions of euros in near free loans from the European Central Bank as part of its two phase long-term refinancing operations in December and February.)
‘Harsh, unfair, selfish and ineffective’
The largest opposition party, the socialists, described the budget measures as ‘harsh, unfair, selfish and ineffective’, noting that for the first time ever the social budget was reduced, by €8 billion. And it strongly criticised a €10 billion reduction in spending, such as infrastructure and research and development, that was ‘central to Spain’s economic growth’. The economy is expected to contract by 2.7%, according to some experts.
The Socialists also pointed to a hidden cut in dole payments: while the Government expected 600,000 more unemployed this year, it was cutting the overall budget for unemployment benefit by €1 billion.
Pay back time for banks and employers
For Cayo Lara, leader of the communist-led United Left, the budget was a ‘provocation against the social majority of the country.’
‘Never in the history of our country has so much damage been done in so little time. Rajoy has dedicated himself to paying back all those that backed the government: the Employers, with the labour reforms, the banks, giving them the Cajas and the Church with the reforms to the Abortion Law*, the elimination of education for the citizens and by not cutting any subsidies.’
The budget displayed a disregard for the majority and was a tax give-away for a ‘privileged few’ and ‘a clear reward to fraudsters’, he said. Lara argues that a corporate tax rate of 35% for firms with more than a million euros in turnover would bring €13 billion into state coffers, more than all the receipts projected this year by the Government, while instead of an amnesty the government should mount a crack down on tax dodgers to force them to pay the correct, legal rate of tax, a move that would deliver €7 billion more than the €2.5 billion expected under the amnesty.
The Government also came under attack Tuesday by United Left and the Socialists for releasing budget details to Germany’s CDU parliamentary group President Volker Kauder, a close aide of Chancellor Merkel, before the Spanish parliament. Lara described the decision to tell the German MPs before Spanish parliamentarians as a ‘shameful’ undermining of national sovereignty.
Lara warned that Rajoy hasn’t listened to the verdict of voters in March’s elections for regional assemblies in Andalucia and Asturias where the Popular Party had performed badly, nor the general strike on March 29 and predicted that protests would grow ‘if the government continues on the same mistaken line of cuts and harsh adjustment. The streets will mobilise agains this brutal aggression.’
Among those planning just that are the students. The Students Union is now mulling a 48-hour strike later this month. ‘Never since the dictatorship have budget cuts been so devastating. It is an unprecedented attack on on public education,’ said leader Tohil Delgado.
* The government is considering revoking Spain’s 2010 law that gave women the legal right to choose to an abortion on demand up to 14 weeks of pregnancy, or 22 weeks in cases where the mother’s health is at risk or the foetus shows serious deformities. Previously women could only have an abortion in cases of rape, serious deformity or when the mother’s mental or physical health was threatened.