Government announces savage cuts in education and healthcare

Mariano Rajoy on Monday announced sweeping cuts to both education and the public health system with the aim of saving 10 billion euros this year.

The prime minister divulged the information in a press release made public at 5pm after a meeting with his economic advisors and the heads of the two affected ministries. The main opposition Socialist Party immediately called for Rajoy to appear in Congress to lay out the details of the cutbacks, arguing that a press release is not a suitable channel for such an announcement.

The release spoke of privatization, changes in education and healthcare and also of “better rationalization and the elimination of duplication and greater efficiency in the running of large public services, which will be put into this place this month.” The 10-billion-euro cutback is equivalent to some 10 percent of total government expenditure on healthcare.

Rajoy is expected to explain the fine print of the cutbacks to his party on Wednesday. With a careful eye on the markets and Spain’s ballooning risk premium, which exceeded 400 basis points again last week, Socialist leader Alfredo Pérez Rubalcaba offered his party’s support for some aspects of the Popular Party’s plans for reform.

We are willing to recoup some consensus with the government,” said Rubalcaba

“We are willing to speak with the government and to recoup some basic points of consensus,” said Rubalcaba.

However, the notion earlier put forward by Economy Minister Luis de Guindos that rich people should foot the bill for public health services was described by Rubalcaba as “deplorable.” The PP party secretary, Carlos Floriano, later denied the government was entertaining such a plan and said De Guindos’ words were a “personal reflection.”

Neither is the Socialist leader enamored by government plans for a fiscal amnesty for tax evaders. “It is true that we have differences and we will try to ensure that the line is not crossed in education and healthcare.”

The release also stated that Rajoy and his team had discussed the stability plan to be presented to the European Commission later this month. Chief among its aims will to meet the deficit-reduction target of three percent of GDP at the end of 2013. It also seeks to “reaffirm the promise of a deficit reduction in the regions to 1.5 percent of GDP in 2012.” To this end, in the next few days the regions, under the auspice of the Treasury, will be required to adapt their spending forecasts to the central government budget for 2012 and to marry their economic-financial plans to the national macroeconomic model.

The government also announced its intention to speed up the sale of savings banks that are part publicly owned. In terms of privatization, the government is set to announce a timetable of structural reforms in the next few weeks that will concentrate on improving competitiveness and flexibility in the Spanish economy “in the energy sector, the rental market, entrepreneurial activity and in research and development.”