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News, April-May 2010Government makes swathing cuts21st May. The cabinet agreed last night to a hefty U-turn in its strategy to deal with the recession. Under pressure of the markets and other EU governments to cut the immense 11% deficit, the cabinet took the unpleasant decision not only to slam the brakes on public works, but also to cut public employees' pay by an average of 5%. A general strike is in the air. As in other countries, the government hoped to buy its way out of the recession, borrowing money to create jobs in public works, such as road and rail schemes, which would take on those being laid off in the home-building side of the construction industry. But the gamble has been lost. Public debt has shot up and with 20% of the population unemployed there is little sign of the country coming out of recession this year. The government hoped for almost 2% growth, to recoup some of last year's GNP decline, but now expects its policies to put another million out of work and GDP to be just over 1%. The aim is to reduce the deficit to 6% by the end of next year and to the Eurozone target of 3% in 2013. Public sector workers got an above inflation pay rise in January, the government hoping these would also do their part in buying Spain out of recession, but now the State is so indebted that it has to cut back salaries in July below last year's figure to save itself from bankruptcy. Ministers are cutting 15% from their pay, while the lowest paid public workers will again be paid under 1000€ per month. Pensioners, who have had above inflation rises over the past few years, will also have to face a freeze from next January. Public works have been a major contributor to growth, via their effect on employment, as well as the impact of faster travel, etc.. Over the past two years many have lost their jobs in the construction industry, as Spain had seen an unprecedented level of home building - which went bust. Banks, especially local government owned Caja savings banks, had also over-lent to builders and are nursing heavy debts, some of which may never be repaid. They are therefore also unable to help those who could use a loan to create jobs elsewhere in the economy. Many immigrants had come to join the work force, including many evangelicals from Latin America, Africa and Eastern Europe. Many of these might have hoped for a job on a new rail line or at least short-term job creation scheme. Some will return home to lands, like Argentina, where hopes are again higher than here. Others have little alternative but to stay. Their home countries are also in trouble and they may not even have enough to pay a single fare back. Many evangelical churches are also affected, with as many as half a congregation unemployed. Yet standing together and supporting one another they are better off than many, some of whom are now looking at this witness. More: |