Friday

22nd Feb 2019

Spain: €65bn more cuts, despite protests

  • Miners protest in Madrid (Photo: Antonio Rull)

Spain has announced a drastic series of spending cuts and tax increases in the face of an ultimatum by the EU, as the country struggles to reduce its deficit while negotiating a bailout for its banks.

"These are not pleasant measures but they are necessary," Prime Minister Mariano Rajoy told parliament referring to a programme designed to bring in €65 billon in savings by the end of 2014.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

"We have very little room to choose. I pledged to cut taxes and now I’m raising them. But the circumstances have changed and I have to adapt to them," he addded, according to Bloomberg.

The measures include a hike in valued added tax from 18 to 21 percent, a reduction in unemployment benefits and a reform of the public administration.

The move is an attempt by Madrid to reassure markets and bring its borrowing rates down to more sustainable levels.

It is also part of a quid pro quo deal with its eurozone partners, which have given it an extra year to bring to its deficit to below the three percent of GDP required by EU rules.

It is expected to reduce its budget to 6.3 percent this year, to 4.5 percent in 2013 and to 2.8 percent a year later.

"This is a challenging but achievable objective," said EU monetary affairs commissioner Olli Rehn said at the beginning of the week, while noting that Madrid will have to commit to the "rapid adoption of additional measures."

The deeper cuts raises the question of whether Spain will be pushed further into recession.

When asked about this directly after the Spanish announcement, Rehn's spokesperson said the commission would first have to analyse the proposals.

The new cuts have caused anger among many of Spain's citizens, with the country already suffering from a high unemployment rate, particularly among its youth.

On Wednesday, thousands of miners made their way to Madrid to protest the government. They were joined in the Spanish capital by anti-austerity demonstrators.

Madrid is also in the process of negotiating a deal for its banks, which may need up to €100 billion in outside help.

A political agreement for the terms of the capital injection was struck by Spain's euro partners on Monday and is expected to be formalised on 20 July.

While a bank stress test has to be completed in autumn before the final sums of money for Spain's banks are known, €30 billion will be available from the eurozone at the end of July.

Spanish bailout deal to be sealed amid protests

Eurozone finance ministers on Friday are set to iron out the final details of bailout of up to €100bn for the Spanish banking sector, just as tens of thousands Spaniards took to the streets in protest against fresh spending cuts.

News in Brief

  1. Report: Russia offered Italy's Salvini €3m for EU election
  2. EU and US could 'quickly' clinch mini-trade pact
  3. Belgium to gather evidence on Syria 'foreign fighters'
  4. Dozens of Tory and Labour MPs threatening to quit over Brexit
  5. UK will struggle on free-trade deals, EU says
  6. Juncker pledges climate action alongside Swedish activist
  7. Swedbank brings in external help on money laundering revelations
  8. No-deal Brexit danger 'very serious', Corbyn says after Brussels meeting

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  2. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  3. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  4. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  5. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  6. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  7. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  8. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  9. Nordic Council of MinistersSeminar on disability and user involvement
  10. Nordic Council of MinistersInternational appetite for Nordic food policies
  11. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  12. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups

Latest News

  1. Swedish activist urges EU to double climate goals
  2. EP budget chair seeks clarity on Saudi lobbying and College of Europe
  3. Microsoft warns EU on election hack threat
  4. Brexit talks to continue after May-Juncker meeting
  5. Trump and Kurz: not best friends, after all
  6. EU commission appeals Dieselgate ruling
  7. 'No burning crisis' on migrant arrivals, EU agency says
  8. 'No evidence' ECB bond-buying helped euro economy

Join EUobserver

Support quality EU news

Join us