Madrid has promised European counterparts to cut its deficit to 6% of its Gross Domestic Product (GDP) next year, from 11.1% last year. The total austerity package proposes additional savings of €15bn between 2010 and 2011.
The aim is to trim Spain’s budget deficit from 11.1% of gross domestic product last year to 9.3 % this year and get it down to 3% by 2013.
General information and figures
Madrid has promised European counterparts to cut its deficit to 6% of its Gross Domestic Product (GDP) next year, from 11.1% last year. The total austerity package proposes additional savings of €15bn between 2010 and 2011.
The aim is to trim Spain’s budget deficit from 11.1% of gross domestic product last year to 9.3 % this year and get it down to 3% by 2013.
The recession has sent unemployment rates soaring by more than 20 percent of the working population in the first quarter of 2010 – the highest in the euro zone. Youth unemployment is running as high as 40%. The government raised its forecast for unemployment next year to 19.3%, from 18.9% previously.
Unemployment rate (June 2010): 20.2%
GDP (bn euro – 2010): 1052.77
General Government Debt (2009 - % GDP):53.2
Public deficit (2009 - % GDP):11.1
Source: Eurostat
Public Employees
Pay cut 2010 – average 5% from June.
2011 pay freeze.
13000 job cuts in the General State Administration.
Profit seeking temporary agencies are legalized and allowed to work in the public sector.
Cuts in social benefits
Allowances for elderly dependant people are decreased by 5.2%.
Housing benefit is decreased by 19.3%.
2500€ birth allowance has been scrapped.
« Final » unemployment benefit of 420€ is abolished.
Temporary agency work agencies get a say in granting benefits to workers. Abolition of €426 monthly payment for the long-term unemployed.
Pension reforms
Pension levels have been frozen for 2011, excluding guaranteed minimum pensions.
There is a proposal to increase the retirement age to 67.
Proposal to increase the minimum contribution period required to be eligible for a pension, which now is 15 years, penalizing the workers worst positioned in the labour market.
Instead of the government imposing a new retirement scheme, the trade unions insisted on opening negotiations. The outcome was an agreement signed on the 2nd of February concerning pensions, employment policies, collective bargaining, public employees and industrial and energy policies.
Cuts in public services, transfers and public investments
The infrastructure budget is decreased by 30%.
The budget for Research and Development is reduced by 7%.
The budget of the Ministries is cut by 15.6%.
2 Ministries (equality and housing) have been abolished.
The aid for developing countries is cut by 20%.
Departmental spending cuts of about 16% have been agreed.
35% cut in windpower subsidies till 2012.
Privatization of 49% of the public airport operator as well as the airports of Madrid and Barcelona.
Privatization of 30% of the State national lottery and gambling group.
Collective bargaining and labour reform
Labour market reforms that make it cheaper and easier to lay off workers have been adopted.
Severance pay has been decreased from 45 days per year worked to 33/25 depending on the contract.
Companies will find it easier to lay-off workers temporarily during “bad” times (reference to ‘situation and perspectives of the company’). It will be easier to fire « permanent » workers on the base of “actual or foreseen losses” or “persistent fall in income” thereby reducing the role of labour courts.
On wages, the government has given companies increased possibilities to deviate from the sector agreement and pay lower wages. Guidelines for wage bargaining for the next three years were set at the beginning of 2010. These guidelines limit wage bargaining to a maximum of 1% for 2010, 1.5% for 2011 and 2 to 2.5% for 2012. These are maximum figures so sector or company agreements are allowed to go for much less. Whereas wages would be topped up in case inflation exceeded the forecasted inflation, this indexation of wages to effective inflation is postponed to the end of the three year period, thereby alleviating costs for business but imposing real wage losses on workers during the next years if inflation is higher than was expected.
The strict government positions have also radicalized employers' positions and there is no room for social dialogue to correct situations.
Tax changes
The government will also soon unveil proposals to raise taxes on the wealthiest Spaniards.
Tax rise for personal income above 120,000 euro (the tax rise is expected to raise about €170bn-€200bn).
VAT was increased from 16% to 18% from 1 July 2010.
Tobacco tax increased to raise €780m per year.
Corporation tax for small business has been cut.