Spain to cut 27bn euros from budget this year

Spain is reducing its budget by 27bn euros (£22.5bn) this year in what is among the toughest austerity drives it has ever taken, reports the BBC.

Changes will include cutting departmental budgets by 16.9 per cent and freezing the salaries of public sector workers. The government claims it will be able to raise 12.3bn euros over the next year, helped by a rise in tax for large businesses.

Deputy Prime Minister Soraya Saenz de Santamaria described Spain’s situation as “extreme”. She explained that the top priority is to sort out public accounts She went on to say that this is a period which demands serious efforts to cut spending and carry out structural reforms in order to help the economy expand and create jobs.

However, economists are unsure whether the reductions will be sufficient to satisfy the country’s European partners. In March, Prime Minister Mariano Rajoy came to an agreement with the European Commission to cut Spain’s deficit to 5.3 per cent from 8.5 per cent of GDP this year.

Professor of economics at Madrid-based IESE Business School, Javier Diaz Gimenez, said that the budget appears to be non-credible. He insisted that the country will be unable to make the agreed target of 5.3 per cent because the cuts are not enough given the growth forecast.