Spain is slashing 13,000 public sector jobs and freezing government wages as it rushes to push out austerity measures aimed at bringing its budget deficit under control. More cuts are coming:
Mr Zapatero was fleshing out the details of a €15bn plan announced on Sunday for deeper spending cuts to reduce Spain’s deficit from 11.2pc of GDP last year to 9.3pc in 2010, and eventually to 3pc in 2013.
Spain eased out of recession with 0.1 per cent growth in first quarter compared to the preceding quarter, the government statistics’ office said in a preliminary report Wednesday.
Regional governments will also be asked to make €1.2bn in savings from their budgets and the Spanish Cabinet would vote on cuts and 2011 budget spending on Friday, he said.
Spain is teetering on the brink of a double dip, given that it barely even qualifies for having come out of recession. It just grew 0.1% after the ugly streak below.
Cutting jobs, financial support for civilians, and freezing wages puts the nation at substantial risk of re-entering (continuing?) recession. Yet not pushing through real austerity risks a financial crisis due to budget deficits growing the nation’s total debt. Even if European support allows for cheaper borrowing costs, the budget deficits need to be fixed and absent exceptional GDP growth there’s only one way — cutting spending and social support, which is unfortunately negative to GDP growth in the near term even if likely positive in the longer-term.
Thus it’s clearly a tricky situation, hopefully they continue with the current path of austerity and solve the nation’s long-term budget problems, rather than simply delay things for fear of a near-term double dip.
(GDP Chart via Trading Economics)