Spain has revealed that its budget shortfall for 2011 will be bigger than expected as the new government announced tax increases on income and property as well as a freeze of civil servant’s wages.
Facing a deficit of eight percent of GDP — rather than the predicted six percent — Deputy Prime Minister Soraya Saenz de Santamaria outlined a further nearly nine billion euros worth of public spending cuts.
She told reporters: “We found that the figure for the public deficit for this year was much higher than the previous government announced and was working to.” The minister added: “We’re facing an extraordinary and unexpected situation, forcing us to take extraordinary and unexpected measures.”
A freeze on government employees salaries will continue and there will be virtually no new hiring. Spain already has the highest jobless rate in the eurozone at 21.5 percent.
The unions complained the job policy is counterproductive. Julio Lacuerda, Secretary General of the General Workers Union said: “If this new initiative goes ahead, we are going to be facing a very significant loss of employment, which will be very costly for the government.”
Property and income taxes will be raised, but the latter only for two years with the wealthiest paying most.
More austerity is promised for the new year. The previous Socialist government cut the budget shortfall from 11.2 percent of gross domestic product in 2009, and the conservatives must take up the baton and bring the deficit down to 4.4 percent in 2012 and 3.0 percent in 2013.