Austerity in Spain

Happy new year

The new government is turning the fiscal screws

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Readers' comments



Miguel Silvestre Balado

Hello to Everybody;

I have read all your comments with great interest, and I can say that I am happy.

I have 40 years but I am a subscriber to The Economist since the 90's and the truth is that I had not saw this level of interest I appreciate now in waht I call "domestic affairs".

I do think the solution to our problems is not in a few lines since the matter is more complex than it seems.
I firmly believe that the first thing to do is tell people the truth. And when I say the truth, I mean the truth.

I'm not sure if the political parties and Governments want to tell the truth, because their interests are often not the interest of the general population....

Truth or partisan interest? ¿Austerity in Spain or knowledge and attitude of the people?

Keep in touch ... if you want ...


Send for the ghost of Ronald Reagan. He cut taxes rather than raise them and the money just poured in. The way of higher taxes just means more evasion and the black economy grows. It is well known in Spain that most small businesses keep two sets of books. One for the authorities and the real one for themselves. I have no doubt the same applies to Italy, Greece and Portugal.

A 20% flat tax for these and possibly even lower to match Ireland's 12.5% would do wonders for inward investments. It would surely tempt many Swedes and Germans to relocate their business into sunnier climes!

Ramón Planes

Valencia is a case in point of how not to do things. Political repression of the opposition, illegal party funding, authoritarian attitudes by the PP autonomous government and astronomic expenditure in indispensable things like pharaonic works, lavish shows, yacht regattas and F1 races have seriously undermined Valentian democracy and economy.

Meanwhile, the strategic areas of its export economy -strong industry and agriculture in the back-country, leading ports and traditional hospitality on the coast- were neglected in favour of quick profits and plundering of the treasury by wacky politicoes.

There is pressing need in Spain for a cut in the numbers of politicians in favor of qualified officials, in line with other major European countries. The high number of politicians is a remnant from Francoism and the Transition that should have no room in today's Spain, where much more social consensus reigns and there is a surplus of qualified manpower.

JGradus in reply to vmeldrew

Ireland, Spain and the rest of southern Europe has had lower taxes than northern Europe for ages, and so has the rest of the world.

Yet, lo and behold, northern Europe is one of the succesfull regions in the world. So maybe it ain't so simple, is it?


Do you want an easy recipe for spanish situation?

1. Abolish autonomous governments. This means a saving over 100 billions per year. In addition you would eliminate bureaucracy.

2. Make totally flexible the labour market in public and private sectors. This would increase exponencially the productivity of spanish companies (now the lowest of Europe). As a result the unacceptable unemployement rate would decrease quickly and the skilled workers shouldn´t have to emigrate.

3. Stop grants for unions, political parties, cultural affairs, civilization alliances, gays lobbies, third world development, etc.

4. Obligate banks to report actual value of their real state assets and let go to bankruptcy who must go to bankruptcy. This would reactivate credit for productive companies within a healthy financial sector.

5. Stop new public infrastructure investments. Fast train (AVE) to Cuenca? Airport in Huesca? We are crazy. (both cities are under 50.000 inhabitans). There are many airports in Spain with less than 4 passengers per month (I´m not kidding) and there are 42 unprofitable.

6. Obligate spanish ambassadors to sign contracts of spanish companies abroad. E.g. it is shameful to see in New York how italians sell million dollars in their awful prosciutto and spaniards, with excellent spanish ham (unique in the world), sell nothing.

7. Taken this easy measures Spain would have surplus, the funding cost would plunge and Spain would attract foreing investments. Thereby Spain could elaborate a huge industrial and technological plan in order to create productive companies and replace lost real state sector.

8. Finally Spain should increase the interior ministry budget because if we want to enforce this measures, we would need to hire thousands of new policemen with big batons to hit hard to millions of union, separatist, new unemployed politicians, ruined bankers, unproductive workers, progressive guys and, in general, illiterate and lazy people that for sure would be against this measures.

It is no so difficult, otherwise Spain will be ruined for generations.

Galaicus2010 in reply to FROMMADRID

You've lost me with your 8th recipe. Last time I've checked it wasn't illegal in Spain to be a separatist: some of them have even been elected to parliament.

I'm afraid attitudes like yours only fuel separatism.

Bob Kenyon in reply to Nirvana-bound

Spain situation is a bit different than Italy or Greece, their debt issues were private debt rather than public. When the real-estate bubble blew-up the recession that followed has significantly decreased state revenues and consequently the public debt which had pretty small according to European standards up to that point increased.

Another big problem in Spain is like Italy the grey and black economies are pretty big and unfortunately escape to taxes. I am curious to see if Rajoy will propose reforms to prevent this to follow.


IMHO Rajoy is doing just fine, maybe because Germany is pressing those decisions. But anyway his measures are sound, aimed at first stopping the bleeding, as it should be. Ironically, some of those decisions - such as higher taxes and higher property taxes - are not right-wing decisions. He is also refusing to finance the real-estate bubble losers - he has refused to finance a bad-bank to "own" the real-estate loses. So far so good.

Meanwhile the Catholic church - represented by a truly medieval character (Monsignor Rouco Varela, another Galician) is already making noise about the abortion law. It'll be a big mistake if Rajoy tries to change this law: Spain is, these days, a surprisingly tolerant country and most people understand that abortion is a personal decision. Besides, anything in that direction would divide the Spanish population and would represent a distraction from the real problems: the economy and the credit crunch.

But Rajoy faces way too many problems: apart from the debt problems, Spain is a country with very low birth rate where the smart youth is migrating to Germany, England, USA, even Chile, while in their own country are being replace by far less skilled immigrants, some of them from totally different cultures, such as Morocco. To me this looks like suicide.

With such a bleak future, I wouldn't be surprised if regions like the Basque Country or Catalonia push for independence. Who knows? maybe 30 years from now we would look back at a different Spain and clearly see the terrible mistakes from Mr. Aznar and Mr. Zapatero.

Let's hope for the best... maybe miracles can happen...

BTW, I'm as PSOE as they get, although I disliked Mr. ZP.

Bob Kenyon in reply to Juan A. Hervada

Juan A., nothing new under the sun. When opposition wins the election the usual audit of the public accounts always show that deficits are bigger and that statistics were presented in an inventive way. I've seen this in many different countries. That's part of the game. The new government will always paint it black.


El Pais reported today that 70% of Spaniards support tax raises over cuts in services. So the people are clearly with him...


Don't blame Mariano Rajoy for doing what he does. He has no choice but to hike the taxes significantly, enforce huge spending cuts & maintain the painful austerity measures, for years to come, if the nation ever hopes to rein in the monsterous budget deficit. There is no other alternative.

Ditto, Ireland, Portugal, Italy & other floundering Euro nations. Wake up folks, to the new reality. Now you'll go through what the poor/developing world went through in the past. The tables have turned..


Its no great mystery, socialists spend and waste peoples money, and the right of centre governments have to come in after and clean up all the mess with higher taxes, and cut the waste in public spending. That is what is now happening in Spain.

Juan A. Hervada

Now, we all knew that truth and statistics are incompatible for many politicians, let alone the outgoing Mr. Zapatero. But then, Mr. Rajoy sounds pretty disingenuous when he tries to have us to believe that he didn't know that Mr. Zapatero was lying when he proclaimed the deficit to be a modest 6% or so.

If Mr. Rajoy knew that his predecessor was lying, that the actual figure would be more like 8% (and just wait), that he'd have to rise taxes, what was he doing when he promised NOT to rise taxes? Telling the truth?. Then, of course, if he didn't know that the Socialists are the masters of creative statistics, that everything, from the unemployment figures to the deficit was just a fake, does he deserve to have won the election?

Paul Marks

I suspect that the heart of the problem is the 1978 Constitution - which was a "Christmas Tree of Rights" (like so many modern Constitutions). "Rights" being defined in a "positive" way as nice-things-from-the-government not as limits on the governments power to spend and regulate (Barack Obama would love parts of the Spanish Constitution just as he detests the United States Constitution - which is written from a very different point of view of political philosphy).

These welfare "rights" started off a small burden (such things always do start small) - but they have (of course) grown out of control and now Spain is doomed.

So are many other nations.


Someone mentioned rights and the constitution earlier. Like so many other countries Spain has fallen into the "rights" trap so that the general population expects the government to fix and pay for everything as though it were an organisation that is totally separate from each citizen. Any eroding of these rights is seen as an insult to the section affected without any thought to where the money ought to come from to maintain them. In many cases, people are blissfully ignorant of the fact that rights are paid for by them (taxes).

Spain, and other countries that are crisis plagued, have to accept that rights cost money and if there isn't enough to go around, then rights will have to be cut. Rights are not a God given thing, they have to be bought and paid for just like anything else.

Having said this, Mr. Rajoy and his team have to be extremely careful about where savings are made. My personal opinion as a Spanish resident, is that his first round of cuts could have been deeper and lessened the tax burden that has been thrust upon the working and middle classes. I also think that he should cap all funding to all the autonomous communities to cover only basic services. If regions want all the bells and whistles as well, e.g. expensive embassies abroad, etc. then the locals within the region should pay more tax.


I share TE´s view that Rajoy was not clear about his tax program. However one thing is clear to me, he has an iron will to put Spain on track. Otherwise he would not impose such unpopular meassures. I think people in Spain welcome him.

Nirvana-bound in reply to Bob Kenyon

You got that right, but it does not change anything. Spain has only years of austerity to look forward to, like all the other collapsing euro economies. Corruption in high places & the underground economy(s), don't help at all, either. Rajoy's hands are shackled by stark public misperceptions & 'entitlement' fantasies.

Dark, sombre & mennacing clouds hover over European skies..

pmXR3QJiwR in reply to FROMMADRID

Dear reader,
Read the comment of FROMMADRID from Jan 8th 2012 21:04 GMT.
Would you like to live in a country like the one that he describes?
Don't be surprised that there are parts of the country that want independence.



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