Spain outlines fiscal adjustment plan worth 102 billion

The biannual fiscal plan presented by the Spanish government to the European Commission includes tax hikes and spending cuts worth 102.149 billion euros over the next two-and-a-half years.

The plan, which was filed a week late, calls for budget cuts worth 13.118 billion euros this year, 38.956 billion next year and 50.075 billion in 2014.

The measures include the tax hikes and spending cuts approved two weeks ago by the government. These include an increase in the standard and reduced value-added tax rates, which the administration estimates will bring in 19.8 billion euros through to 2014. The government also approved eliminating the Christmas bonus payment for civil servants and a freeze in public sector hiring.

The new aspects of the plan include a further five billion euros in spending cuts on health and education at the regional level. These will come on top of the 10 billion euros in cuts in these two areas already announced by the administration, which include lower spending on medicines and an increase in the number of pupils per classroom.

Brussels has agreed to give Spain an extra year to bring its public deficit back within the European Union ceiling of three percent of GDP. It now has until 2014 to do so, and plans to reduce the shortfall from 8.9 percent last year to 6.3 percent this year, to 4.5 percent in 2013 and 2.8 percent the following year.