Category Archives: Budget 2012

PP and PSOE square up for battle over health reforms

The Next Battleground: Ministry of Health (photo by Miolo)

Undeterred by the blips and wobbles of the markets last week, the Spanish Government is pressing ahead with their economic reforms – today outlining their plans for reform of the health service.

The spokesman for health issues within the Partido Popular, José Ignacio Echániz, went to great lengths to insist that “there will not be cuts” to the health budget. The Government are conscious that being seen to mess with the highly valued state-supported health system would cost them dearly in electoral terms.

Instead, Echániz insisted that spending “adjustments” will have to be made to recover some of health service’s €15 billion debt built up by the last Government, but that “the Spanish people will continue to have the service they have known up until now”.

The Ministry of Health, headed up by Ana Mato, has revealed that it is “already doing its homework to maintain the essence of the Spanish Health Service: that it is in universal, fair and free for all Spaniards.”

“For this reason,” added Echániz, “we need to make some reforms, which will be set out for the Autonomous Communities in the next weeks”.

To be certain to express his party’s support for the health system, Echániz continued, saying that the intention behind the reforms is that the health service remains “the crown jewel of the Welfare State”.

However, Echániz was less than candid about whether the reforms would attempt to include the controversial issue of copayment – whereby patients would be required to contribute a fee to received medical treatment.

The opposition PSOE seized on this point to issue a “head-on rejection” of any reforms which include the idea of copayment. Trinidad Jiménez, the Socialist spokesman on Health and Social Security issues, gave a press conference at PSOE headquarters today in which she warned that the issue of copayment was not off the table.

Any inclusion of copayment in the health reforms, she argued, would be “unfair” becacuase citizens “already pay with their taxes and would have to pay again on top of that”. Furthermore, it would mean patients would be forced to choose “whether to go or not” depending on their ability to pay.

She had one further warning: “When we look at what other EU countries have done, we see that with copayment the cost of health services have risen, whereas in Spain it is relatively cheap – two points under the average”.

Over coming weeks, as the Government begin to set out their reforms to the health service and social security, the skirmishes between the two main parties will undoubtedly escalate over such emotive, and electorally sensitive, issues.

Alonso invokes Thatcher’s “bitter medicine”

Spain's economic reforms - A bitter pill to swallow? (photo: li-la-lutz)

With the Spanish economy on the ropes and back in the main pages of Europe’s newspapers today, the ruling Partido Popular has come out fighting in defence of their economic strategy. Earlier Economy Minister Luis de Guindos claimed the problem was more a case of nervousness about Spain’s ability to recover.

Now the party’s spokesman in the Congress of Deputies, Alfonso Alonso, has used the news of the increased risk premium as proof that the Government’s tough General Budget, although a “bitter medicine”, is vital if Spain’s economy is going to recover.

Alonso assured that the Government is not taking these measures “gratuitously”, but rather in response to “an extremely serious” situation. “The austerity drive and the containment of the deficit continue to be essential”, he said to EFE news agency. “This is the bitter medicine that Spain needs to win back confidence”.

Students of British politics might be reminded by Alonso’s last comment of the words of former British Prime Minister Margaret Thatcher who, at the height of her own austerity drive in the 1980s famously said: “Yes, the medicine is harsh but the patient requires it!”

At the time Thatcher’s reforms were deeply divisive and were met with great hostility. It was not for years after that her Government began to be widely credited with restoring credibility to the British economy. So far, the PP have only witnessed the hostility – they will be hoping recognition and vindication will not be too far down the track.

Onwards and Downwards

Economy Minister Luis de Guindos, defending the Government's economic strategy (photo: by mercedesalonso)

Another shaky day for the Spanish economy, as Spain’s risk premium continues to rise – reaching the highest point since December, and since the Partido Popular took power at the end of last year.

Economy Minister Luis de Guindos claimed today that the rising risk premium is down to the markets’ worries about the ability of Spain to recover from the economic crisis. He went out of his way, though, to highlight that this was not a problem confined to Spain.

“What this shows,” he said, ” is that there has been an increase in market nervousness, but it has not been only about Spain. It has affected all the countries of the eurozone. It has been evident in the rest of the eurozone countries which are vulnerable in one way or another.

“It is a problem which is all about the negative perception of economic growth in Spain, Portugal and Italy,” de Guindos added. He went on to defend the measures the Government is taking, especially with regard to the proposed national budget for 2012.

The only slight silver lining today was that the Spanish stock exchange held steady, despite the storm clouds gathering overhead. The Ibex 35 closed down just 0.2%.

Unemployment in Spain – Reuters

Reuters has today posted a useful video highlighting the rising unemployment in Spain, with a brief summary of the proposed Government budget for 2012.

Disappointing Bond Auction Knocks Confidence in Spanish Economy

(photo by aranjuez1404)

The Spanish economy took another slap in the face today, and with it so did the Government who had hoped that their defiance in the face of violent ant-cuts protestors last week would signal strength of purpose.However the markets once again had different ideas. In the first auction of government bonds since the announcement of the Government’s austere budget for 2012, the Ministry of the Economy sold €2.5 billion in three-, four- and eight-year bonds despite aiming to sell between €2.5 – €3.5 billon.

In a rallying call to those who oppose his proposed budget, Prime Minister Mariano Rajoy said today:

“Spain is facing an economic situation of extreme difficulty, I repeat, of extreme difficulty, and those who do not understand that are fooling themselves.”

He also went on to raise the threat of Spain requiring an international bailout should his budget plans falter altogether. Stressing that although “no on likes” the budget his Government announced last week, he added “the alternative is infinitely worse”.

To add to this disappointment, Spain’s risk premium rose its highest level since the Partido Popular took office in December. The stock markets also took a hit, with the Ibex 35 closing down more than 2 percentage points.


Snip, Snip, Snip…

Spain's PM, Mariano Rajoy (photo:

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.