Spain's Prime Minister Mariano Rajoy (right) in the Congress of Deputies. (Efe)
The new package of austerity measures that Prime Minister Mariano Rajoy presented to the parliament on Wednesday is in line with the recommendations from the European Commission, following the rescue deal for the Spanish banking sector that was agreed in the Eurogroup on Monday.
The new measures will spare no one. Public employments, value-added taxes, unemployment benefits and tax reductions on real estate investments, are among the areas that will be affected by the new round of budget measures.
"There will be strict obligations for Spain from Europe," Rajoy said.
"Commitments and obligations"
The intervention of the Spanish economy is indeed already a fact. It is enough to look at the speech that Olli Rehn, vice-president of the European Commission, gave to his colleagues in the Eurogroup on Monday night.
Rehn did not only recall the conditionality of the rescue package for Spain’s banking sector, but also the “commitments and obligations” that Spain has agreed with the European Union, which refer both to the budget deficit target and to the strict compliance with the recommendations by the European Commission “to address macroeconomic imbalances.”
With the new budget cuts, the Spanish government will comply with the Commission's call for "the rapid adoption of additional measures to ensure the achievement of the fiscal target for this year," as stated in Rehn's speech.
Postponed budget deficit target
In the Eurogroup meeting on Monday, Spain achieved another year to comply with the budget target – 2.8 percent in 2014 – the new budget cuts will be more ambitious and, contrary to the first package of austerity measures introduced by former Prime Minister José Luis Rodríguez Zapatero in May 2010, it will be under the supervision of the ‘troika’ – the European Central Bank, the European Commission and the International Monetary Fund.
Although the supervision will not be done in a formal way, as in Greece, Ireland and Portugal, it will be so in an informal way. The visits are already frequent and they are much more than just simple meetings to gather information, as the IMF used to do.
Budgets of the autonomous regions
Apart from requesting that Spain fully complies with the budget in 2012, the European Commission has also asked Spain to presents a balanced budget plan for the autonomous regions.
A limit on spending is expected to be introduced for the autonomous regions after the financial council on Thursday. The limit will be similar to the one for the national administration. It will be an overall limit for all the regions and then each region will adopt its own spending limit depending on the economic situation.
This article was translated and edited by Stina Lunden.
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