Snip, Snip, Snip…

Spain's PM, Mariano Rajoy (photo: lamoncloa.gob.es)

The Spanish Government, and in particular Prime Minister Mariano Rajoy, have continued to defend the planned cuts to the central government budget announced last week.

The Government’s announcement last week that it was looking to make reductions to €27 billion over the course of 2012 (equivalent to 2.5% of GDP) continue to dominate headlines.

On average, there will be a 16.9% reduction in spending by Government ministries. Yesterday, the Government revealed a further breakdown of exactly where those cuts would fall in particular Government ministries, with Spain’s Foreign Ministry receiving the largest percentage budget cut for this year, meaning the biggest cuts will be made in overseas aid and development programmes.

Furthermore, all civil servant salaries will be frozen, and they will be required to work and extra 10 hours a month.

The Government continues to insist that their planned budget, although extremely severe, is better and significantly less painful than having to receive a bailout from European counterparts.

On top of the €27 billion planned to be cut from the national budget, Spain’s Autonomous Communities are facing a cut of €15 billion to their budgets to reach the necessary deficit reduction targets.

Today’s El Mundo carries a useful breakdown of the planned budget. Among the key points are:

  • All Government ministers will have their salaries frozen.
  • The Royal Family’s annual budget will be reduced by 2%.
  • A 25% reduction in the investment into Research and Development – one of the areas of Government expenditure which has been hardest hit.
  • A 33% reduction in railway expenditure and 23% reduction in airport investment coupled with a 10% rise in airport duty.
  • A 16.9% average reduction in the expenditure of Government ministries. The Foreign Ministry sees its budgets slashed by 54.4%, with significant reductions also for the Treasury, Public Works, Education, Industry, Agriculture and Economy. Least affected are the Ministry of the Presidency and Ministry of the Interior.
  • A controversial “fiscal amnesty” in an attempt to recuperate €2.5 billion.
  • State funding of political parties is set to be reduced by 12.7%
  • A huge cut of 97.6% to the planned weapons modernisation budget at the Ministry of Defence.
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