Spain announces new austerity measures. Will it work this time?

Puppycow

Penultimate Amazing
Puppycow
Joined
Jan 9, 2003
Messages
32,184
Location
Yokohama, Japan
Spain unveils new austerity under European pressure

(Reuters) - Recession-plagued Spain unveiled new austerity measures on Wednesday designed to slash 65 billion euros from the public deficit by 2014 as Prime Minister Mariano Rajoy yielded to EU pressure to try to avoid a full state bailout.

The conservative leader announced a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent and cuts in unemployment benefits and civil service pay and perks in a speech interrupted by jeers and boos from the opposition.

"These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros," he told parliament.

Analysts said the draconian savings plan, tearing up several of Rajoy's campaign promises, showed Madrid was already under de facto supervision from Brussels even though it has not requested a sovereign bailout and retains access to bond markets. Some said the tax increases could exacerbate the recession.
Click to expand...

Meanwhile the OECD sees long term dangers in the incredibly high rates of youth unemployment in countries like Spain and Greece.

What can Spain do to fix the high rate of unemployment among its youth (50% or more) while at the same time meeting its targets for reducing the budget deficit? Is there some problem with Spain's labor laws? (I don't know anything about Spain's labor laws, which is why I'm asking).
 
In the UK, the point at which we tipped back into double dip is about 3-6 months after capital projects were cancelled as part of the austerity measures.

A major problem in Spain is that construction was a disproportionately large part of their economy. Now the bottom has fallen out of the property market, no-one is building anything. This then has a knock-on to the rest of the economy.
 
I think everyone in the anti-austerity camp should buy Spanish government bonds, and not demand the current high interest rates.

Or is it just other people who are supposed to hand them cash for a promise?

eta: in fact I challenge all government employee unions (Yeah I'm talking about you AFSCME) to invest 100% of their pension funds in Spanish government bonds, in order to show faith and solidarity with their brothers and sisters working for the Spanish government. ;)
 
Last edited:
WildCat said:
I think everyone in the anti-austerity camp should buy Spanish government bonds, and not demand the current high interest rates.

Or is it just other people who are supposed to hand them cash for a promise?

eta: in fact I challenge all government employee unions (Yeah I'm talking about you AFSCME) to invest 100% of their pension funds in Spanish government bonds, in order to show faith and solidarity with their brothers and sisters working for the Spanish government. ;)
Click to expand...

The funny thing is that this might actually work. If it would push the interest rates down for two years or so and give the state some breathing space to refinance debt and reduce payments without crippling austerity. It could do a lot of good for the economy - if other reforms (such as labor laws) were passed in the meantime and allowed to work for some time.

McHrozni
 
Spain have got major problems with the labour laws, austerity alone wont help. workers here have such punitive rights once under contract, that companies hire very sparingly. (not if you can help it)

and self-employment for relatively low earners is such a joke, there is zero incentive for anybody to register, to then have to pay the first €80-100/ week to the govt (and accountant) whether that's all you earn (or even if you earn nothing) or not.

raising IVA (VAT) from 18 to 21% will just encourage even more non-payment.
 
In general, this current state was forseen at least 15 years ago when it was realized borrowing was very heavy in good times -- what would happen in bad times when, according to left theories of spending to get out of recession, there was little room for even more borrowing?


:popcorn1
 
Beerina said:
In general, this current state was forseen at least 15 years ago when it was realized borrowing was very heavy in good times -- what would happen in bad times when, according to left theories of spending to get out of recession, there was little room for even more borrowing?


:popcorn1
Click to expand...

do you mean this?

:popcorn1
 
kevsta said:
Spain have got major problems with the labour laws, austerity alone wont help. workers here have such punitive rights once under contract, that companies hire very sparingly. (not if you can help it)
Click to expand...

When youth unemployment is over 50% I think that's a very strong indication that the labour laws need to be reformed.

I am glad though that subsidies for coal mining are being cut. That's something that should happen in any case, regardless of the fiscal situation.
 
:rolleyes:
Puppycow said:
Spain unveils new austerity under European pressure



Meanwhile the OECD sees long term dangers in the incredibly high rates of youth unemployment in countries like Spain and Greece.

What can Spain do to fix the high rate of unemployment among its youth (50% or more) while at the same time meeting its targets for reducing the budget deficit? Is there some problem with Spain's labor laws? (I don't know anything about Spain's labor laws, which is why I'm asking).
Click to expand...


Sign them up for the next media-inflamed Islamo-war ... I think that might just be Syria ... tell them they will be "heroes" of the New World Order! :rolleyes:
 
Last edited:
WildCat said:
I think everyone in the anti-austerity camp should buy Spanish government bonds, and not demand the current high interest rates.

Or is it just other people who are supposed to hand them cash for a promise?
Click to expand...

Just last week, there was an investor's rally on the purchase of Spanish government bonds, a rally sparked in part by announcements by Spanish officials that they got the go-ahead to relax some of the austerity measures imposed on them.
 
The Don said:
In the UK, the point at which we tipped back into double dip is about 3-6 months after capital projects were cancelled as part of the austerity measures.

A major problem in Spain is that construction was a disproportionately large part of their economy. Now the bottom has fallen out of the property market, no-one is building anything. This then has a knock-on to the rest of the economy.
Click to expand...

Or not as it is questionable if there ever was a double dip.

http://www.guardian.co.uk/business/2013/may/01/double-dip-recession-doubts-ons
 
For Spain and other European countries to get a hand on Government spending is long overdue,but I have to wonder if the Austerity measures imposed by the EU are the wrong way to go about it and are doing more harm then good.

More and more I think that the EU is going to fail in it's attempts to become the De Facto Central Government of Europe. It was founded as a way to eliminate stupid and costly economic barriers between countries and I think it might well end up going back to that.
 
Jaggy Bunnet said:
Or not as it is questionable if there ever was a double dip.

http://www.guardian.co.uk/business/2013/may/01/double-dip-recession-doubts-ons
Click to expand...

You're quite right, in retrospect it perhaps wasn't a double dip (it was within statistical error), at best it was an aimless wobble.

Austerity, or perhaps more accurately austerity as implemented by the current government has managed both to reduce investment and increase government spending at the same time. A double whammy if ever there was one.
 
You must log in or register to reply here.

Back
Top Bottom