Austerity measures around the eurozone

 

Spain's parliament voted on Tuesday to ratify a labour reform package aimed at reviving the euro zone's fourth-biggest economy.

Here are some details of austerity measures implemented by governments around the eurozone as they battle to head off a spread of the debt crisis begun in Greece.

* SPAIN:

- Spain's parliament on Tuesday ratified labour reforms aimed at reviving the euro zone's No. 4 economy, after the main opposition Popular Party said it would abstain.

- The reform was introduced by decree last Thursday but Tuesday's ratification vote triggers a process that converts it into a bill which can be debated and amended by lawmakers. The process could take up to a year.

- Economists said labour reform was a vital step to restoring long-term economic growth by easing the cost of hiring and firing, amongst the most expensive in the developed world, and making Spain's manufacturing industry more competitive.

- Prime Minister Jose Luis Rodriguez Zapatero on May 12 announced fresh spending cuts totalling 15 billion euros in 2010 and 2011. Civil service salaries will be cut by 5 percent in 2010 and frozen in 2011, while more than 6 billion euros will be cut from public investment.

- The cuts are aimed at speeding up fiscal consolidation and meeting Spain's new deficit targets of 9.3 percent of GDP in 2010 and 6 percent in 2011, compared to 11.2 percent in 2009.

* FRANCE:

- France on June 16 announced a rise in the retirement age. Under the plan, which is likely to meet trade union resistance, the minimum retirement age will be lifted gradually to 62 in 2018 from 60, and levies on capital gains, stock options and other investment income will all shift higher.

- President Nicolas Sarkozy hopes the reform will convince investors he is serious about cleaning up state finances, which are set to register record deficit and debt levels in 2010.

- In an effort to keep a lid on the budget deficit, France has said it will freeze all spending, except pensions and interest payments on government debt, between 2011-2013 and cut state operating costs by 10 percent over the same period. Sarkozy has said this does not amount to an austerity plan.

* PORTUGAL:

- Portugal's parliament approved the government's austerity package on June 9 in its final vote. The plan, announced on May 13, aims to speed up a reduction in Portugal's budget deficit to 7.3 percent of GDP in 2010 and 4.6 percent in 2011, down from 9.4 percent in 2009. It will raise income and value-added taxes and cut the wages of some top-paid civil servants.

- Portugal's Treasury chief ruled out on June 9 drawing on the euro zone aid package, citing a successful bond sale and a strong economic recovery in Q1, which the statistics agency revised upwards.

- Prime Minister Jose Socrates and opposition leader Pedro Passos Coelho drew up steps on June 3 to slash the budget deficit, including five percent pay cuts for senior public sector staff and politicians, and increases in VAT sales tax, income tax and profits tax up to 2.5 percent.

- The cabinet approved the programme on May 20. The government said it aims to save 2 billion euros in 2010.

* GERMANY:

- Chancellor Angela Merkel said her government aims to save around 80 billion euros between 2011 and 2014 and get the German budget deficit below European Union limits by 2013.

- The cabinet agreed a package on June 7 which will slash welfare spending by 30 billion euros over the period, cut public sector payrolls by up to 15,000 by 2014, and raise new taxes on nuclear power plant operators and air travel.

- The government also hopes to realise some 5.5 billion euros through subsidy cuts, and raise around 2 billion euros per year with a financial transaction tax. Berlin is also considering cutting the armed forces by 40,000.

* ITALY:

- On May 25 a cabinet meeting approved a 24 billion-euro deficit cut and measures such as delaying retirement dates by between three and six months, a state salary freeze and cuts to the pay of high public sector earners.

- Regional and local governments will be pressed to contribute some 13 billion euros of spending cuts in 2011-2012, sources said, almost inevitably affecting schools and hospitals.

- Though Italy kept its budget deficit down to 5.3 percent of GDP last year -- well below the EU average -- the budget aims to slash it to 2.7 percent by 2012.

* GREECE:

- The rescue package to aid Greece's debt problem has given it time to implement austerity measures and focus on fiscal consolidation, the head of Greece's debt agency said on Tuesday.

- Greece has approved a pension reform bill, after agreeing with the European Union and the International Monetary Fund, a fresh set of austerity measures aimed at pulling the country out of a severe debt crisis that has shaken the euro zone.

- Under the EU-IMF deal, Greece plans to narrow its budget shortfall from 13.6 percent of GDP in 2009 to 8.1 percent this year, 7.6 percent in 2011 and 2.6 percent in 2014.

- Austerity measures include a public sector pay freeze until 2014. Christmas, Easter and summer holiday bonuses, also known as 13th and 14th month salaries, are abolished for civil servants earning above 3,000 euros a month and are capped at 1,000 euros for those earning less.

- Public sector allowances are cut by an additional 8 percent. These allowances were cut by 12 percent under a round of austerity measures announced in March.

* TAX HIKES:

- The main VAT rate was increased by 2 percentage points to 23 percent. In March it had grown to 21 percent from 19 percent.

- Excise taxes on fuel, cigarettes and alcohol are increased by a further 10 percent.

- The government expects to generate additional revenues through a one-off tax on highly profitable companies, as well as new gambling and gaming licences and more property taxes.

* PENSIONS:

- The government has said it will freeze pensions in 2010, 2011 and 2012. According to the pension bill, expected to be voted by parliament in June, the statutory retirement age for women will be raised by 5 years to 65 to match the retirement age for men.

* IRELAND:

- Ireland's public sector unions passed a pay deal on June 15, as expected, boosting government chances of pushing through further savings in the budget for 2011 and limiting the chances of strikes.

- Ireland has carried out some of the harshest austerity measures in the debt-stricken euro zone, cutting public service salaries by 5-15 percent in a 2010 budget which inflicted 4 billion euros' ($5.37 billion) worth of cuts.

- Under an accord reached in March, the government promised no further public sector pay cuts until 2014, instead looking for savings through public sector reform while trade union leaders agreed to try to prevent strikes and end work-to-rule protests.

- The government's budget for 2010 presented in December projected a deficit of 11.6 percent of gross domestic product.

* AUSTERITY:

- Fiscal reform so far: three austerity budgets presented in little over a year, in Oct. 2008, April 2009 and Dec. 2010. With the first two budgets focused on tax rises, December's budget for 2010 drew most praise as it delivered spending cuts of 4 billion euros, including a cut in public sector pay.