8.9 billion in spending cuts announced

Spain’s new Prime Minister, Rajoy Mariano, has announced €8.9 billion of spending cuts and tax increases to deal with Spain’s economy.

Little over one month since the election Rajoy’s Conservative government has vowed to reduce the deficit to 4.4% in 2012. The estimated budget deficit for 2011 is 8% of GDP, 2 points higher than the outgoing Socialist government predicted.

“This is the beginning of the beginning,” Rajoy’s deputy Soraya Saenz de Santamaria said yesterday.

“We are facing an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures.”

Some of the measures include:

  • Income Tax – Increases of up to 7% for the highest earners, expected to raise €6 billion.
  • Property Tax – A property tax increase that will affect people purchasing homes valued over the average.
  • Public Sector – Public sector workers will see an increase to their working week from 35 to 37.5 hours.
  • Public Sector – Salaries will be frozen.
  • Minimum Wage – Will be frozen at the current €641 p/month.
  • Pensions – Pensions will increase this year by only 1%.

A proposal to increase paternity leave by one month was deferred for a year.

A further list of measures will be announced in 2012, bringing the total cut in spending to a huge €16.5 billion.