MADRID: Spain laid out its budget plans Friday, pledging to drop its deficit below a EU-stipulated three-percent limit after several failed attempts while also tackling unemployment.
Finance Minister Cristobal Montoro outlined proposed tax rises to cut the deficit, including an increase in levies on alcohol and tobacco products, and a new sugar tax on soft drinks.
Re-instated last month after a lengthy period of political limbo caused by two inconclusive elections, Spain’s conservative government finds itself stuck between a rock and a hard place.
On the one hand, it has made commitments to Brussels to reduce Spain’s deficit and debt, and on the other, it faces unprecedented parliamentary opposition and demands to put a stop to years of crisis-induced austerity. Montoro predicted that the deficit would fall to 2.2 percent of GDP in 2018, “below (the EU limit of) three percent.”
Already under intense EU scrutiny, Spain expects to cut its deficit from 5.1 percent to 4.6 percent of GDP this year, and to 3.1 percent in 2017. Montoro acknowledged it was a tough task.
“To reduce it to 3.1 is without a doubt a big effort,” he said, adding this would involve an adjustment of around 16 billion euros ($17 billion).
“Who are we asking to make that effort? Families, the self-employed, small and medium-sized enterprises? Absolutely not,” he said, adding the government would ask those with significant financial muscle such as big companies.
He said Spain’s corporate tax would remain unchanged at 25 percent, but companies would benefit from fewer rebates, bringing in an extra 4.3 billion euros.
The country’s minimum wage, meanwhile, will be raised by 8 percent next year to 825.5 euros, as demanded by the main opposition Socialists — higher than that of neighbouring Portugal, but far lower than the 1,467 euros in France.
Sitting next to him, Economy Minister Luis de Guindos broached the sensitive subject of unemployment, which the conservative government is aiming to address after years of economic crisis.
Now significantly better compared to 2013 when it came close to 27 percent, Spain’s jobless rate is still the second worst in the European Union, after Greece.
De Guindos predicted unemployment would come in at 19.6 percent this year, falling thereafter to 12.8 percent in 2019.
