Madrid, Spain – Spain has today unveiled a new austerity plan of 65 billion euros including the three-point increase in sales tax (VAT) and budget cuts, following the green light partners of the Euro with a new loan for Spanish banks.
The Prime Minister Mariano Rajoy said in Parliament that the country’s future was at stake, while Spain faces recession, deficits and inflated a concern among investors facing its sovereign debt.
Mariano Rajoy told a crucial moment, which will determine “our future and that of our families, our youth and our welfare state.” “This is reality, there is none other and we must get out of this hole, and we must do so as quickly as possible,” he said. “There is no room for fantasy or improvisations because there is no choice,” said the Spanish prime minister.
Accusing the former socialist government have left a deficit of 8.9% in 2011, Mariano Rajoy, the head of the country since last November, insisted that “the excesses of the past must be settled at present.”
VAT increase of 3 points to 21% on products and services, such as clothing and cars, cigarettes and telephone services, and 2 points, from 10% for goods such as public transport fares, the food and industrial services for hotels and bars. By cons, VAT on consumer goods such as bread, medicines, books and remains at 4%.
The cuts, which should represent a saving of 65 billion euros by 2015, also provide a lower salary for civil servants and members of Parliament, a reduction of 30% of municipal councilors and a new wave of closure of public enterprises.
Stressing the need to reduce administration, Mr. Rajoy as an example the three million jobs lost in the private sector, face an increase of 289,000 in the number of jobs in the public.
Finally, the age of retirement will be gradually pushed back from 65 to 67 years.
Fourth largest economy in the euro area, Spain struggles to reduce its public deficit, in a context of recession, record unemployment (nearly 25%) and banking crisis.
In this context, thousands of miners, who left the north and east of Spain there are more than two weeks, demonstrated in Madrid to safeguard their jobs threatened by this savings plan. Arrived Tuesday night in Puerta del Sol and a hero’s welcome after 18 days of walking, miners denounced the subsidy reductions that jeopardize their jobs.
Their struggle was supported by the Spaniards who see the symbol of the country’s difficulties and the unfair burden that policies pose to middle and working classes, since the beginning of the financial crisis.
Faced with the difficulties of Spain, the EU finance ministers of the euro area have agreed on the night of Monday to Tuesday on the terms of a new bailout of Spanish banks. They said 30 billion euros (about $ 36.88 billion) could be released by the end of July. Furthermore, they agreed to postpone by one year, until 2014, the deadline to return to a budget deficit of 3%.
Last month, they had already given the green light to unblock EUR 100 billion to support the Spanish banking sector, weakened by bad loans and the collapse of the housing bubble.