Spain, battling an economic slowdown, is to cut public sector recruitment and freeze top civil servants’ wages as part of the effort to balance next year’s budget.
In a major economic speech, Prime Minister Jose Luis Rodriguez Zapatero admitted that Spain’s economy will grow by less than 2% this year. He said: “There are serious difficulties which are starting to have a direct effect on many people’s lives. We’re going to hire 30% fewer public sector workers in 2009. The wages of all top officials will be frozen, but only top civil servants as I will respect the agreements we reached with the trade unions with regard to public employees.”
The OECD has predicted GDP growth will be 1.6% this year, from last year’s 3.8% and said it will be even lower next year at 1.1%. Inflation is expected to hit 4.6% this year, slowing to 3% next year.
Zapatero said Spain is “experiencing a steep slowdown” with the end of country’s ten year long construction boom, which has coincided with the global credit crunch and rising oil prices.
A sharp fall in tax revenues, as building sites stop work, has reduced the government’s room to manoeuvre by slashing the budget surplus. It has already announced fiscal stimulus measures, including tax cuts totalling 10 billion euros to try to boost the economy.