To calm euro zone debt crisis fears, the Spanish conservative government plans to axe ten billion euros in spending on health and education to meet a deficit reduction target.
The ruling PP has an absolute majority in the national parliament, and new rules are in place which will let Madrid take control of budgets in autonomous regions that do not get behind the austerity drive starting next month.
“We need to carry out reforms to fulfil our deficit objectives. Our revenues, and therefore our resources, have fallen,” said Deputy Prime Minister Soraya Sáenz de Santamaría.
Spain ended last year with an 8.5 percent deficit, and has to get that down to 5.3 percent this year.
One of the reform measures is: pensioners will have to start paying 10 percent of the cost for prescription medicines that were free for them before – but with a monthly cap of 18 euros, or as low as eight euros for the poorest.
People who are working will have to pay 60 percent, where they have been paying 40 percent.
The country will also make stiffer checks on foreigners who come to Spain to take advantage of free universal public healthcare.
This system alone has a 16 billion euro deficit.
The reforms also point to higher university fees, longer working hours for the teachers, and bigger classroom sizes as part of cuts to education spending.
Assuring the regions make the cuts will be essential in helping to lower the country’s borrowing costs – crucial for investor confidence.
Half of public spending is by the regions. The 11 where the Partido Popular is in power have signed up to the reforms.
Even where it is not, the regions are seen bowing to the tough controls because the crisis has eroded their credit ratings and they are depending on the central government for financing.
But parties in the opposition begrudge Madrid its lack of stimulus proposals.
Spain’s regions missed deficit targets by a wide margin last year, and the main factor that could knock them off this year is a steeper than expected recession that would reduce tax income at all levels of government.
Certain analysts are convinced that Prime Minister Mariano Rajoy will have to consider more measures, such as raising value-added tax, which is low compared with other EU countries.
Up until now, protests against austerity have been limited in Spain. But unemployment is getting worse. Around 24 percent is the prediction for this year, and when the belt-tightening began after a prolonged boom ended in 2008, last November the voters kicked the Socialists out of power.