Thursday

24th May 2018

Spanish PM: 'We have no money for health or education'

  • People will have to pay 'just a few euros a month' more for drugs, Rajoy said (Photo: isobrown)

Spain has approved €10 billion of spending cuts and higher fees for education and health in a bid to show investors it is getting its deficit under control.

Speaking on the eve of the cabinet decision on Friday (20 April), centre-right Prime Minister Mariano Rajoy said he does not have enough money.

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"It's necessary, imperative because at this moment there is no money to pay for public services ... There's no money because we have spent so much over the last few years. So we have to do this so that in the future we can get out of this situation," he told national media.

Rajoy said people will have to pay "just a few euros a month" more for medication than they do now. The wealthy will pay more than the poor, while those who do not have a job and do not qualify for state aid will be exempt.

In addition, regions will be allowed to make students pay 25 percent of the cost of their studies, compared to 15 percent before.

Labour unions have announced protests for 29 April in reaction to the measures, which come on top of €40 billion of cuts passed earlier this year and despite warnings by the International Monetary Fund that too much austerity will harm recovery.

At the same time, the interest rate for 10-year Spanish bonds jumped above six percent on Friday - seven percent is bail-out territory.

Spain is currently battling worse-than-expected recession and an unemplpoyment rate of almost one in four people, while trying to cut its deficit from 8.5 percent of GDP to 3 percent next year on pain of EU fines.

EU officials have fiercely denied there is any talk of a rescue by the European Central Bank or the eurozone's bail-out funds.

"There is no plan of using the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM) for programme purposes in the case of Spain," EU economics commissioner Olli Rehn told Reuters on Friday.

IMF chief Christine Lagarde on Thursday suggested that the two bail-out funds - the existing EFSF and the upcoming €500 billion strong ESM - could be used to recapitalise Spain's ailing banks.

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