Spain’s regional governments should ‘rebel’ against demands by Madrid for further cuts to schools and hospitals, says the Communist-led United Left.
The 17 ‘autonomous’ regions of Spain, who spend 37% of the total outlay by the public purse and are responsible for budgets on education, health and social services, are facing an unprecedented financial squeeze as the right-wing Popular Party government of Mariano Rajoy seeks to meet lethal EU deficit reduction targets.
Spain’s central government recently announced it was significantly wide of its target – 2011 ended with a deficit of 8.51% of gross domestic product, 2.5% over amount it promised the EU it would achieve for the year.
Rajoy’s administration, elected in a landslide victory against the Socialists in November, has to bring the deficit down to 4.4% of GDP this year. This means Spain will have to come up with more than 40 billion euros in savings, meaning spending cuts that most economists see as impossible given that the economy is already sliding into recession and unemployment is already the highest in the European Union at 23%.
The government is blaming overspending on regional admnistrations. As part of a package of tax rises and cuts announced in the New Year, Madrid announced penalties for those regions that do not meet deficit targets in the coming years.
Cuts to education that have left schools crumbling and without heating have been at the centre of massive protests recently, particularly in the Valencia region where police responded with a level of violence not seen the days of the Franco dictatorship .
In a move that may add to tensions within Rajoy’s Popular Party, United Left leader Cayo Lara argued that regional government – since local elections last May mostly in the hands of the right wing party – was not in the main responsible for overspending and should stand up to Madrid.
The Popular Party is under pressure from the EU to accelerate cuts but plans to hold off further unpopular budget announcements until after the regional elections in Asturias and Andalucia on March 25. Spaniards will be voting in these elections without knowing the magnitude of the cuts that will be imposed on them, said Lara, who described Madrid’s position as ‘deceitful’.
The way out of the crisis had to include a reversal of policies - like slashing welfare, cutting the public sector and deregulating the labour market - that hurt ordinary Spaniards. Instead, the country needs investment to boost growth, funded by clawing back Euros 90 billion in annual tax evasion and revenues lost due to ‘regressive’ tax cuts on the rich and large corporations, Lara said.
Chucking money at the banks, as the ECB has done, giving them a total of over one trillion euros following a second offer of dirt cheap loans earlier this week, was not a solution, he added.
‘It is Kafkaesque that the ECB won’t buy debt directly from governments and instead uses the banks as intermediaries that just speculate and make money on the backs of citizens. ‘
The bankers, he said, have ‘sacked’ public funds. They are using loans from the Eurozone’s central bank that carry 1% interest ‘to pay off their international creditors and buy sovereign debt at 4-6%.’
Reckless lending by Spain’s financial sector led to a housing boom that went bust in 2007, sending the Spanish economy into free-fall. Spanish banks pocketed Euros 123 billion from the ECB on Wednesday, after taking a similar amount in December.
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