Brussels, 28/09/2012 (Agence Europe) - On Thursday 28 September, the European Commission expressed approval of a new batch of reform measures unveiled by Spain.
“The comprehensive reform plan announced today (Thursday) by the Spanish authorities is a major step to broaden and deepen structural reforms, building on important achievements made already. The reform plan includes concrete, ambitious and well-focused measures and establishes clear deadlines in many areas,” said EU Economic and Monetary Affairs Commissioner Olli Rehn.
On Thursday, the Spanish government approved its draft budget for 2013, including a round of austerity measures to reduce the public deficit and a new batch of reforms, including the establishment of an “independent budget authority” to audit accounts and restore credibility. “This new structural reform plan responds to the country specific recommendations issued to Spain under the European semester and goes even beyond them in some areas. The reforms are clearly targeted at some of the most pressing policy challenges. Further enhancing the flexibility of product and labour markets will indeed be critical to boost growth and employment and to support fiscal consolidation,” commented Rehn, adding that Spain is facing serious challenges for the correction of major imbalances that require an over-arching response, and the measures announced on Thursday are an important further step towards meeting said challenges.
On Friday 28 September, a spokesperson for Rehn said that it was too early to comment on the budget, which needed to be analysed in detail and this would be done as part of the excess deficit proceedings, adding that the Commission will shortly be publishing its Autumn Economic Forecasts, at which point, the figures presented by Spain could be assessed, particularly the growth and deficit figures.
Spain's 2013 budget reflects the fact that the Spanish government has little room for manœuvre. Spending will fall across the board, apart from on pensions and servicing the debt. The draft Spanish finance law is based on a forecast recession of 0.5% of GDP and the central state will make savings of some €14 billion in order to make €40 billion of savings in total, to reduce the public deficit from 6.3% of GDP at the end of 2012 to 4.5% at the end of 2013. Ministers will see their budgets shrink by 8.9% on average, with some being harder hit than others. The culture ministry's budget, for example, is being slashed by 30%, while the ministry of public works has announced a 22% cut in finance. Civil servants will again have to pay a price, with their Christmas bonus (fourteenth month) being suspended for 2012 but restored in 2013 and monthly pay frozen for the third year in a row. In terms of tax revenue, all the tax increases introduced earlier in the year will continue, particularly the rise in VAT from 18% to 21% and the rises in company tax and income tax. New taxes have been introduced, like a 20% on lottery winnings, expected to net €824 million. (LC/transl.fl)