Spain unveils new austerity plan to cut deficit(The Raping of the “Peasents” Continues…)
May 13, 2010
Spain’s public sector workers were rudely awakened yesterday by a cold bath of pay cuts and a pension freeze as the Government bowed to pressure from the bond markets to adopt drastic solutions to its debt problems.
José Luis Rodríguez Zapatero, the Prime Minister, is reluctantly following Greece in adopting a hairshirt in the face of soaring market interest rates that threatened to wreck plans to cut the public sector deficit. Civil service pay will be cut by 5 per cent this year and frozen next, while 13,000 public sector jobs will go. Government investment will be cut by €6 billion and the “baby cheque”, a €2,500 payment to new mothers, goes.
According to preliminary GDP growth estimates for eurozone members from the European Commission, in the first three months of 2010 Spain showed the first sign for two years that its economy is expanding — but the rate was 0.1 per cent, compared with the final quarter of 2009. Without a significant boost to the economy, Spain will not meet its Government’s target of 1.8 per cent GDP rise in 2011.
The Commission’s figures offered cold comfort for the euro, which sagged amid concerns about growth. Overall, GDP growth among European Union states in the first quarter was 0.2 per cent, against 0.8 per cent in the United States. The euphoria over the €750 billion package of loan guarantees agreed by eurozone leaders and the IMF is dissipating.
The Spanish austerity plan helped to trim the yield on Spain’s ten-year bond to just below 4 per cent. The austerity package, worth about €15 billion, is intended to reduce Spain’s public sector deficit to 9.3 per cent of GDP this year, compared with 11.2 per cent in 2009.