Spanish PM Announces Further Austerity Measures

by Ulrika Lomas, Tax-News.com, Brussels

06 December 2010

Determined to reassure anxious international markets of Spain’s solvency and to reduce the country’s deficit, Socialist Prime Minister Jose Luis Rodriguez Zapatero has recently unveiled details of a further round of austerity measures, including spending cuts, fiscal measures and privatisation proposals.

Facing mounting pressure, both at home and abroad, Prime Minister Zapatero announced plans to reduce the current taxation of small- and medium-sized businesses in Spain by increasing from EUR120,202 to EUR300,000 the threshold below which reduced corporate taxation is applied. According to the Prime Minister, around 40,000 companies will benefit from the proposal.

Other initiatives outlined by the Prime Minister include plans to remove the EUR426 monthly additional unemployment benefit, granting the long-term unemployed six months extra in benefit payments. The costly measure was introduced at the beginning of the crisis.

Zapatero also unveiled plans to privatise 30% of the state lottery and 49% of the country’s airport operator Aena. These partial privatisation measures are expected to generate in the region of EUR14bn for the government.

Commenting on the latest announcement, European Commissioner for competition Joaquin Almunia stated that the recently unveiled initiatives demonstrate the determination of the Spanish government to tackle the problems that the country is currently facing, adding that such measures are sure to have a positive impact and will serve to restore confidence.

The Spanish government aims to reduce the deficit from 11.1% of gross domestic product last year to 9.3% this year and to 6% next year.

The measures are expected to be approved by the cabinet on December 3.

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