Spain outlines €102 billion financial adjustment plan

 

The biannual fiscal plan presented by the Spanish government to the European Commission includes tax hikes and spending cuts worth €102.149 billion over the next two-and-a-half years.

The plan, which was filed a week late, calls for budget cuts worth €13.118 billion this year, €38.956 billion next year and €50.075 billion in 2014.

The measures include the tax hikes and spending cuts approved two weeks ago by the government. These include an increase in the standard and reduced value-added tax rates, which the administration estimates will bring in €19.8 billion through to 2014. The government also approved eliminating the Christmas bonus payment for civil servants and a freeze in public sector hiring.

The new aspects of the plan include a further €5 Billion in spending cuts on health and education at the regional level. These will come on top of the €10 billion in cuts in these two areas already announced by the administration, which include lower spending on medicines and an increase in the number of pupils per classroom.

Brussels has agreed to give Spain an extra year to bring its public deficit back within the EU ceiling of three percent of GDP. It now has until 2014 to do so, and plans to reduce the shortfall from 8.9% last year to 6.3% this year, to 4.5% in 2013 and 2.8% the following year.