The Spanish government is ordering ministries to cut their budgets by 16.9 per cent; it is raising taxes on electricity and gas and freezing civil servants’ salaries. A new report by the Spanish Savings Banks Foundation (FUNCAS) warns that the Spanish government would have to cut its public deficit by 55 billion euros to meet its target of reducing that deficit to 5.3 per cent of GDP by the end of this year – far more than the figure put forward by the Spanish government. The newspaper El País quotes Spanish economist Luis Garicano as saying, “If Spain wants to reduce its deficit from 8.51 per cent to 5.3 per cent [of GDP], it will not have to cut 32 billion euros, but between 53 billion euros and 64 billion euros – which is impossible.”
Controls back in Switzerland
SWITZERLAND, a member of the Schengen agreement on free movement in the EU, has re-imposed restrictions on entry for workers from eastern Europe. The European Commission calls the move “discriminatory”. But the Swiss justice minister said the decision was essential.
Coming in – just not going out
Despite the injection of 1 trillion euros in long-term liquidity to eurozone banks, loans to non-financial firms fell by 3 billion euros during February. Corporate lending grew overall by just 0.4 per cent, lower than in the previous two months. Both Italian and Spanish banks continued using their extra liquidity to purchase sovereign debt (loans to governments), buying 23 billion and 15.7 billion euros respectively.
Dutch say no
It’s not just the fringe countries like Ireland, Greece and Portugal that are having trouble meeting the European Union’s demands for austerity. The Netherlands, too, has been told it is spending more than it should. Its budget deficit for 2012 is forecast to be 4.6 per cent, above the 3 per cent limit that Brussels is trying to impose on the ailing eurozone. Talks to reduce the budget (again) in April collapsed when the Freedom Party said it “would not accept that the elderly in the Netherlands have to pay for nonsensical demands from Brussels”. ■