MercoPress. South Atlantic News Agency

Spain’s austerity package narrowly approved by one vote

Rodriguez Zapatero: tough legislation

There has been temporary relief for Spain’s governing Socialists as parliament narrowly approved the 15 billion Euro austerity package: the motion was passed by only one vote, 169 to 168.

“It was tough legislation to get through. We will try and make sure there is more agreement on any future reforms. I want to thank those who made it possible to get this through” said Prime Minister Jose Luis Rodriguez Zapatero.

The opposition Popular Party voted against the bill – it was only saved when 10 members of the Catalan nationalist party CIU abstained.

“This law has been cobbled together, it’s insufficient and unjust.” said opposition leader Mariano Rajoy.

“We know that this is not good legislation, but not approving it would be even worse for the country and the people” said Ana Oramas from the Coalicion Canaria.

The razor-thin majority has raised doubts about the government’s ability to steer Spain through its economic crisis.

The unions will meet tomorrow to decide how to respond to the austerity plan, which includes wage cuts for public officials. They have warned a general strike is likely.

The additional spending cuts include a 1.2 billion Euro reduction of funding to the country’s regions. Public workers salaries will fall by an average 5% from June and next year there will be a freeze on their wages plus 13,000 job cuts. Government ministers pay will fall by 15%. Pensions will no longer automatically rise with inflation and a 2,500 Euro payout to parents when a child is born has also been scrapped.

The total austerity package is intended to save an additional 15 billion Euro over two years. The aim is to trim Spain’s budget deficit from 11.2% of GDP last year to 9.3% this year and get it down to 3% by 2013.

But economist Nouriel Roubini, of New York University, who forecast the financial crash of 2008, warned Spain, and others, have to do more than just cut: “If everybody is doing fiscal contraction, there’s going to be another double-dip depression in the Euro zone. So, many things have to be done in addition to fiscal austerity, austerity by itself is not enough”.

These latest cuts come as Spain has barely edged out of recession after two years. Recession has sent unemployment rate soaring to more than 20% of the working population in the first quarter of 2010 – the highest in the Euro zone.

The government will also soon unveil proposals to raise taxes on the wealthiest Spaniards. The prime minister said they will have to “show solidarity with the rest of the country in this time of crisis”.