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Ajouter un commentaireIn order to achieve this, the Spanish government approved its austerity plan on 27th May, which sets out cuts worth €15 billion and aims to accelerate the reduction of public debt. It includes a wage cut for the highest earners, a decrease of 5% (worth 0.6% of the GDP) in the salaries of public sector workers from June, and a complete wage freeze from 2011 to 2013. There are also plans to only replace one public sector worker in every two, to abolish the €2,500 benefit paid on the birth of a child from 1st January 2011, to suspend automatic stabilisers on inflation for pensions, to reduce public investment by €6,045 billion in 2010 and 2011, and to cut funds for local authorities by €1.2 billion. Development aid will also be reduced to €600 billon in 2010 and 2011. Thanks to discussions between the Prime Minister Zapatero and the leaders of trade unions CCOO and UGT, a general strike action was successfully avoided. However, trade unions have called for a public sector strike on 8th June.
In addition, Fitch downgraded Spain’s rating on 28th May to AA+, judging that it no longer deserved its excellent « triple A » (AAA) rating and that « in spite of interest rates deserving of the rank AAA, Fitch predicts that the process of economic adjustment will be more difficult and take longer in Spain than in other countries rated AAA, » explained Brian Coulton, responsible for the sovereign ratings for Europe, in a statement. Nevertheless, this downgrading remains difficult to understand considering the severity of the reforms adopted by the Spanish government. It will also hamper the Spanish economic recovery.
On Thursday 13th May the Portuguese government announced austerity measures that aim to reduce its deficit, estimated at 9.4% of the GDP in 2009, to 7.3% in 2010 and then to 4.6% in 2011. The government plans to raise VAT by 1 percentage point to 21%, with an increased tax rate for large companies. Other measures were also adopted, such as a VAT rise of 2.5% for companies and an increase from 1-1.5% on income tax. Up until now, Portugal has shown a certain willingness and determination in its reform. It managed to align the public sector pension system with that of the private sector overnight, and remains the only country to have done this ; this is area in which many are having difficulty instituting change. Nevertheless, Portugal faces a recurring growth problem : their annual growth rate is very low, standing at 0.0% in 2008 and 1.9% in 2007.
As for Italy, Finance Minister Tremonti presented the country’s austerity plan for the next two years to the Council of Ministers on 25th May, and by the end of the day it had been approved. Initially, a spending cut of €26 billion was planned, but this was adjusted to €24 billion. Other measures include : a freeze in recruitment, wage cuts and only replacing 20% of retirees in the public sector (€5-6 billion), a cut in funds assigned to local authorities (€1-2 billion), a decrease in spending on products and services for the government (€1-2 billion), fewer tax deductions (€1 billion) and a reduction in taxes for companies (€0.5 billion). The Italian government’s objective would be reducing its deficit from 5.3% of the GDP last year to 2.7% in 2012. The economic crisis has seriously affected the reputation of Prime Minister Berlusconi ; 26% of the population now think that Berlusconi’s government handled the crisis very badly, twice as many as last year. Meanwhile 38% said that they were a little disappointed, according to the poll done by Italian newspaper Corriere della Sera on 24th May. Furthermore, the Italian trade union CGIL announced that there would be a strike by the end of June.
These three countries find themselves in a tricky situation. On the one hand, they have to respect the directives and the rules established by the Commission ; and improve public finances or risk losing credibility in the markets. On the other hand, they have to satisfy a national population which still does not understand the true impact of the situation or what is at stake, and is often against these austerity reforms. However, Italy, Spain and Portugal have all shown that they are willing adopt austerity measures of unprecedented severity. Now for the hardest part : putting these plans into action, which could be more difficult than predicted.
Although necessary to restore national public finances to a healthy state, these austerity measures will be accompanied by weak growth at a time when countries are looking to restructure. It may be a while before we see any real growth, and things return to normal...
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Finstere Wolken über der spanischen, portugiesischen und italienischen Wirtschaft
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