Brussels oversees Spain's deficit cuts

08:54, May 17, 2010      

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Spain has not escaped the rising tide of budget austerity now affecting much of Europe in the wake of the Greek debt crisis and turbulent financial markets.

The socialist government headed by Jose Luis Rodriguez Zapatero has been compelled to follow orders from Brussels to reduce its high fiscal deficit.

The landmark 750 billion euros (927 billion U.S. dollars) stability plan agreed by European leaders last week to protect the eurozone from the spread of the Greek crisis also foresees tough controls over each member state's public spending. Hampered by the third largest deficit in the region at 11.2 per cent of its gross domestic product (GDP), Spain has had no choice but to tighten its spending.

Zapatero committed himself in Brussels to saving 15 billion euros (18.5 billion dollars), thereby accelerating the deficit reduction by 0.5 percent of GDP in 2010 and a further 1 per cent in 2011. To meet his promise, the Spanish president announced in parliament on Wednesday an austerity program containing the largest budget cuts in 30 years and which largely contradicts the major social policies he has pursued until now.


Zapatero's proposal contemplates an average reduction of 5 percent in civil worker's wages in 2010. The cut will affect a total of three million workers in the public sector, which amounts to 20 percent of the active population. Members of government have sought to lead by example, reducing their wages by 15 percent.

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