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News, August 2010Government makes swathing cuts8th June. The cabinet agreed on 20th May 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%. In answer, a 'general strike' of public employees took place on 8th June. 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. The debt problem is largely a result of the recession, although it highlights the imbalance in the economy which brought about the Spanish part of this. The IMF shows that in the G20, half the rise is due to falling tax income, one third to increasing interest payments and the remainder to stimulus plans and bank rescues. Spain, particularly local government, relied far too heavily on taxes and charges relating to construction projects and home sales. Thus effectively it is now borrowing from China to pay teachers, postmen and car-purchase subsidies. The general public workers' strike of 8th June was the unions' response to the public sector pay cuts. It must be realised that 20% of the population are employed by government and public sector companies. In addition, many of the 20% of the population unemployed depend entirely on the government for their resources. (There are some long-term unemployed for whom all subsidies have now ended, putting their reliance now on other family members... while over a million families have all their 'active' members out of work.) Read some personal opinions on the BBC. In a recent blog article on the BBC, Gavin Hewitt suggests that president Zapatero claims economic policy is a European, not national matter, seeming to wash his hands of it. Likewise, he is quoted as having said that, despite the crisis and economic u-turn, the government's programme is right on course. Could it be that Zapatero is more interested in this year's new abortion law and religious liberty law and other planned or recent social and 'bio-ethical' legislation aiming to cut God out of the statute books? Yet the government has finally had to delay the religious liberty bill due to economic legislation and it ill now be presented after the Papal visit in November, going though parliament in early 2011. 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: |