Spain will implement 65 billion euros ($80 billion) of budget cuts over the next two-and-a-half years to comply with its European Union budget targets. Following are the main measures Prime Minister Mariano Rajoy announced today:
* VAT: general rate will rise to 21 percent from 18 percent. Reduced rate rises to 10 percent from 8 percent; lowest rate kept at 4 percent for “staple” products. Increase in main rate to be enacted as soon as decree published.
* Jobless benefits will be reduced after the sixth month of unemployment.
* Tax rebate for mortgage holders to be scrapped in 2013.
* Pension rules to be revised to make them more sustainable, in line with EU recommendations.
* Public workers: year-end bonus will be scrapped, the number of days off will be reduced, time given for union duties will be cut to the legal minimum, flexibility on location and job description to be encouraged. In case of temporary health problems, the same conditions as for private-sector employees will be applied.
* Public companies and foundations will be scrapped in “significant numbers.”
* Ministries’ spending will be cut by 600 million euros.
* Subsidies for political parties and unions will be reduced by a further 20 percent in 2013 after the 20 percent cut in 2012.
* Local administrations: mayors’ pay will be reviewed and the number of local lawmakers reduced by 30 percent. Regions will have to commit to further budget measures to receive assistance to pay commercial debt and face bond redemptions. All high ranking officials will lose year-end bonus. Administrations will be reorganized to save around 3.5 billion euros.
* Tax rebates for employers hiring workers will be reduced.
* Installment system for corporate tax may be reviewed.
* Benefits for carers will be reviewed.
* Tax on tobacco may be raised. Environmental taxation will be introduced.
* Employers’ social-security contributions will be reduced by 1 percentage point in 2013 and another in 2014.
* Taxes on energy will be changed to eliminate the tariff deficit through cost-sharing.
* Privatizations: air, rail and maritime transport services will be liberalized and eventually privatized.
To contact the reporters on this story: Angeline Benoit in Madrid at firstname.lastname@example.org; Maria Tadeo in London at email@example.com
To contact the editor responsible for this story: Craig Stirling at firstname.lastname@example.org