Tuesday

23rd Jul 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.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

News in Brief

  1. UK foreign office minister quits ahead of Johnson as PM
  2. AKK to boost Bundeswehr budget to Nato target
  3. Police arrest 25 after Polish LGBT-march attack
  4. Ukrainian president's party tops parliament election
  5. EU interior ministers to meet in Paris on migration
  6. Schinas nominated as Greek commissioner
  7. Sea-Watch captain hopes for change in EU migrant rules
  8. Russia willing to join EU payment scheme on Iran deal

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

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. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. As Johnson set to become PM, ministers pledge to resign
  2. Poland's PiS prepares 'failsafe' for October election
  3. Abortion Wars
  4. EU goes on holiday as new UK PM arrives This WEEK
  5. Survey: Half of EU staff 'don't know' ethics rules
  6. Von der Leyen signals soft touch on migrants, rule of law
  7. Timmermans: von der Leyen will be tough on rule of law
  8. Timmermans trolls 'idiot' Brexit negotiators

Join EUobserver

Support quality EU news

Join us