News March, 25th 2010 by

Zapatero vows to reduce budget deficit

In an effort to deflect challenges from the opposition Popular Party, Spanish Prime Minister Jose Luis Rodriguez Zapatero on reiterated his administration’s commitment to reducing the country’s budget deficit through austerity measures.

Opposition leader Mariano Rajoy questioned the credibility of the government’s plan in parliament on Wednesday.

The budget deficit is currently equal to 11.4 percent of the gross domestic product, nearly four times the rate permitted under the European Union.

The premier Wednesday said the government and the autonomous regional administrations have already approved the plan to bring down public spending and urged the conservative Popular Party to contribute to that goal in the regions where it holds power.

Zapatero also said that to achieve the goal of deficit reduction, the government will approve a plan next month to streamline public companies.

The prime minister unveiled other deficit-cutting initiatives, including a reduction in government hiring, a plan to detect and punish tax evaders, cutbacks in pharmaceutical spending and measures to help the autonomous communities lower their deficits.

Rajoy, however, said the austerity plan is not credible and does not guarantee the country’s financial stability.

He also referred to a EU report that criticises the medium-term plan of Spain and other European countries for bringing their deficits down to the EU fiscal target of three percent or less of GDP.

According to Rajoy, the EU said the Spanish government was at fault for basing its projections on overly optimistic growth forecasts and revenue figures and for its slow pace of bank restructuring.

Zapatero responded by urging the opposition leader to read the report more thoroughly.

Like other nations, Spain is trying to trim debt and deficits without crippling the nascent economic recovery.

At nearly 20 percent, Spain has by far the highest jobless rate in the 27-member EU, with 4.13 million people out of work.

The Spanish economy remained in recession during the last three months of 2009, with GDP falling 0.1 percent from the third quarter and 3.1 percent from the fourth quarter of 2008, according to the latest report from the Banco de Espana.

The central bank offered a provisional estimate that Spain’s gross domestic product suffered an overall decline of 3.6 percent last year, the biggest drop in decades.

Many observers at home and abroad are now counting Spain among the European countries most affected by the global economic downturn. Greece is facing possible bailouts from the International Monetary Fund, and Spain, along with Italy and Portugal, are beginning to feel similar pressures. 

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