Sunday, January 15, 2012

Spain cuts spending - where the axe will fall


Last week I wrote about some tax rises that are in the pipeline for Spanish property owners (Spanish property owners face a double tax shock) and our main website now carries an article describing the 2012 tax rises for Spanish residents.  

The plan is to raise some €6 billion in new taxes to reduce the deficit which has risen to 8% of GDP versus a target this year of 6%.  However the new government is also taking an axe to public spending pencilling in nearly €9 billion of savings.

Here is the breakdown of the savings being sought:

Development €1.6 billon
Industry €1 billion
Economy €1.1 billion
Foreign Affairs €1 billion
Education €485 million
Employment €435 million
Finance €432 million
Health €409 million
Agriculture €400 million
Defence €340 million
Interior Ministry  €163 million
Justice €40 million

Local authorities are having their funding cut by more than €1 billion and there are €600 million in cuts planned from the Research and Development budget.

From the perspective of day to day living in Spain I would guess that the Health and Education (if you have got kids) cuts are the most worrying as these are normally areas which need increases and cuts may have a very noticeable impact.  

Public sector workers are going to get a pay freeze, a hiring ban and a longer working week (up from 35 to 37.5 hours) so expect lots of strikes.

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