The Spanish decease

Mariano Rajoy en Bilbao. Imagen tomada por Ike...

Mariano Rajoy en Bilbao. Imagen tomada por Iker Parriza (Photo credit: Wikipedia)

What has the Spanish government done until now? Well on the 11th of July prime minister Rajoy announced the following steps with the endorsement of the IMF.

  • The standard VAT rate was raised from 18 to 21 percent and the reduced rate from 8 to 10 (the super-reduced rate was left unchanged at 4 percent). A number of products have also been moved from lower to higher rates. Other indirect taxes will also be raised.
  • The extra payment in December to civil servants was suspended for 2012 – equivalent to nearly a monthly wage.
  • The mortgage income tax deduction will be removed.
  • Unemployment benefit was reduced (with the replacement rate after six months falling from 60 to 50 percent).
  • Social security contributions are reduced by one percentage point in 2013 and a further point in 2014.

With a unemployment rate of 25% and 50% among the young there are plenty of issues to be confronted. However. There are little signs in the Spanish governments actions to suggest any efforts to stimulate new job creation or any investment that will take the country out of recession. It would seem that they only thing that they are capable of is digging the hole even deeper.