Spanish government promises to reduce budget deficit to 3%
Yesterday, the Minister for the Economy, Elena Salgado, set out the government’s plans to reduce its budget deficit during a visit to London in an attempt to calm fears about the state of the Spanish economy. Salgado met with the directors of the Financial Times who recently warned that Spain’s economy risked facing worse problems than Greece given its levels of debt and its budget deficit. The newspaper also accused the Spanish government of not taking the necessary steps to overcome the recession.
According to sources speaking on behalf of the Ministry for the Economy the visit to London was planned a while ago and the meeting with the directors of the Financial Times was a ‘mere coincidence’. However, Salgado left it to her Secretary of State, José Manuel Campa, to set out the government’s plans for consolidating the economy and structural reform in a presentation organized by Barclays, City Bank and Santander bank.
In his presentation Campa recognized that Spain faced challenges such as the reduction in the rate of unemployment (currently nearly 20%) and the reduction in its budget deficit, which it wants to reduce from 11.4% to 3% in three years. The reforms to the economy will be based on restructuring the banking system, changes to the pension laws and the raising of the age of retirement and reforms to the labour market. Campa also promised to make new cuts to public spending if the economy did not improve.
Campa said that the Spanish economy would grow slightly in 2010 and forecast that GDP would increase by about 1.6% in 2011. He also said that the strategy for consolidating the economy would be based on spending cuts throughout Spain’s public administrations and considerable cuts in investment and subsidies to regional governments equivalent to 0.
5% of GDP.
Campa said that the government would gradually increase the age of retirement to 67 and on labour market reforms he said that there would be new incentives for young people and women to join the workforce and measures to control seasonal unemployment.
Last night Spain’s major trade unions CCOO and UGT made the first steps towards agreeing on the subject of salary increases for 2010 to 2012 which would be between 1 and 2.5% – 1% for 2010, between 1 and 2% for 20100 and between 1.5 and 2.5% for 2012 (in each year there would be clauses allowing for the revision of these figures so that workers would not lose bargaining power if inflation goes off track).
Yesterday, the Vice president of the government, Manuel Chaves, announced the government’s plans to generate more than 274,000 new jobs in 2010.
Spain’s stock market recovered slightly yesterday after last week’s disastrous results with a rise of 1.02%.