Euro Zone Crisis: What More Austerity Means
Spanish Prime Minister Mariano Rajoy announced 65 billion of “exceptional measures to exceptional circumstances,” of spending cuts and tax hikes to be carried out over the next two years:
- 3.5 billion in cut to public spending
- the number of public companies will see a “drastic reduction”
- cuts to civil servants benefits
- no more “Christmas bonus” for senior workers
- the selling of state assets including airports and railways
- 20 percent decrease in funding for unions and political parties
- 21 percent increase from 18 percent for the value added tax (VAT)
The reaction among economists was not upbeat. The Spanish government must impose some sort of structural reforms to receive the billions of euros in bailout funds — possibly 100 billion — from the European Central Bank’s bailout fund.
Unemployment in Spain is nearly 25 percent and the deficit is the central government is 3.4 percent of gross domestic product.
Clashes were already underway in Madrid. More than 8,000 miners have been on strike since the end of May and many had walked for three weeks to Madrid to a rally whose turnout would be, unions hoped, at least 25,000. At some point the protests saw police fire rubber bullets, demonstrators throwing fire crackers and rocks. At least 22 were injured and sevem arrested. The Guardian described the protests as possibly “the most serious protests we’ve seen in the eurozone for a few months.”
Rumors have emerged, and are bring downplayed, of dissension within the leaders of Greece’s unity coalition. New finance minister Yannis Stournaras is being criticized for “failing to broach the issue of Greece’s demand to extend Greece’s deadline for fiscal adjustment.” Addressing the Greek Vouli (Parliament), Alexis Tsipris, leader of the radical left party Syriza, condemned Stournaras for in effect “surrendering” to Greece’s lenders about the terms of the bailout for Greece.
Besides strikes, Greece has seen an upsurge in attacks on immigrants, with most attributed to members of far right party Chrysi Avgi (Χρυσή Αυγη), the Golden Dawn.
In Ireland, even members of the middle class are turning to smuggling in items such cigarettes. The official price of a pack of cigarettes is about 9.20 due to the VAT; black market prices are about 3.20.VAT is 23 percent in Ireland.
Small wonder analysts, hearing of Rajoy’s plan to raise Spain’s to 21 percent, dubbed it poor medicine.
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Photo taken June 11, 2012, in Madrid by Popicinio_01