Zapatero Announces Cuts

Jose Luis Rodriguez Zapatero announced a 5% cut to public sector salaries, as well as reductions to pensions and regional government funding.

He said the plan would save about 15bn euros ($19bn; £12.5bn) over two years.

At the weekend Spain said it wanted to drastically reduce its budget deficit, which currently stands at 11% of GDP.

In his speech to parliament, Mr Zapatero gave details of the plan. Automatic increases in pensions will be suspended from 2011 and funding for regional governments cut.

"We aim to cut civil service wages by an average of 5% in 2010 and freeze them in 2011," he added.

Spain has said it plans to cut the budget deficit by 4.7% by the end of 2011.

The European Union has been anxious to see more fragile European economies including Spain, Portugal and Greece impose tougher austerity measures.

Many Spaniards fear the effect the cuts will have on the economy, which has already contracted sharply, and where the unemployment rate exceeds 20% - twice the eurozone average. 

On Tuesday US President Barack Obama called Mr Zapatero, urging him to take "resolute action".

                                              *********************************************************************

At least he is doing something. I guess it is going to hurt though

I put this overview on another forum: It is getting some interesting replies:

The Spanish government is today likely to announce cuts in public spending and a freeze on recruitment to the public sector. These are the two methods, usually adopted by neo-socialists, to buy and coral voters.

A bloated public sector, fuelled by a bureaucratic paper chase, ends up with more admirals than there are ships. Much of the paper shuffling maze we each have to go through is a job and vote creation exercise.

Theoretically the computer age should have virtually eliminated the pen-pushing sector, which conversely has grown. There was a time when the British and Spanish empires were run by governments smaller in numbers than are 'needed' to run your average Spanish (or British) city today. Economies will recover when public sector staff actually begin to produce something rather than 'organise' it.

Huh! I had better duck; I am sure deserving of some stick for this fiasco. I was experiencing loading problems this morning. There was no indication at this end that my submissions were hitting home, so with each 'failing' I tried again. Can I blame Bill Gates or Justin? Is that allowed?

I wonder if we will see protests/riots similar to Greece.  Spaniards seem to be more resigned to their fate, so maybe not.

It is not only cuts that Zapatero needs to announce, but a crack down on the illegal activity and corruption in the construction and real estate sector.

Together with the Banco de Espana he also needs to force the Banks and Savings Banks to accept their liability under LEY 57/68 Article 1.1 and 1.2.  Without the funding of the Banks most developers would never have been able to carry out their illegal activity and corruption.

Many Banks turned a blind eye to what their clients - the developers - were doing or failing to do.  The Banks lacked due dilligence and were grossly negligent.  Many Banks were complicit in the illegal activity carried out by the developers.

Keith
FINCA PARCS ACTION GROUP

www.fincaparcsactiongroup.com

I have to disagree on two points here, firstly the Spanish are extremely unhappy and frustrated with their own Government and i think we are going to see a lot of unrest, walkouts, strikes and protests, and secondly, correcting the corruption in the construction and real estate sector is not the be all and end all of making Spain a better place.  EDUCATION is the key, if the people were better educated, the level of corruption could not exist as it does.  There is a very small minority of Spaniards, who are fed up with the way their country is being run, they too are fed up with the being fined by the Tax office, being fined for running legitimate businesses, etc etc,the list goes on and on.

Sam

I agree that correcting the corruption in the construction and real estate sector is not the be all and end all of making Spain a better place.

But it is a pretty big issue when you consider Spanish Developers have a combined debt of around 30% of Spanish GDP (see report below).

Add to this figure the 'lost/unaccounted for' off-plan deposits of thousands of innocent purchasers who were never issued with the legally required Bank Guarantees, then you begin to see the scale of the problem.  These funds are simply lost in the system and not accounted for in the combined debt of 30% of Spanish GDP - but they are an additional debt that at some point must be accounted for and refunded.

The Spanish Government certainly needs to take a lead in tackling the problem.

But I agree with you, they also need to tackle the grass roots of the problem - EDUCATION - so that in 20 years time Spain does not have the same problem all over again.

But let us also bear in mind the fact that not all of the corruption in the real estate sector was committed by the Spanish.  Many of the agents and some of the developers and Lawyers were British, Irish, German etc.....and they did little to protect the innocent purchasers.

Maybe there should be more regulation in the Estate Agency business in Spain and more regulation and accountability for Law Firms in Spain.................

Kind regards

Keith
FINCA PARCS ACTION GROUP

www.fincaparcsactiongroup.com

According to Santos Gonzalez Sanchez, president of the Spanish Mortgage Association who speaks on behalf of the country’s mortgage lenders, there is so much debt in the industry that finance for property development has effectively dried up.

‘The real estate sector is bankrupt,’ he said, pointing out that Spanish developers had a combined debt of €324 billion in the third quarter of 2009, the equivalent of around 30% of Spanish GDP, according to figures from the Bank of Spain. The interest bill alone is around €15 billion a year.

Gonzalez added that something drastic needs to be done. He said that the Government or the Bank of Spain needs to take a lead in tackling the problem instead of ‘looking the other way’.

Looks like the public sector aren't too happy with the cuts.  Strikes have been announced for 2nd June.  More here.