Madrid PP leader Aguirre urges PM to cut deeper to tackle crisis

Heavy-hitting former regional premier argues tax hikes have failed

In the face of Prime Minister Mariano Rajoy’s insistence that there is no alternative to austerity, former Madrid premier Esperanza Aguirre, who remains the leader of the regional branch of the Popular Party (PP), on Wednesday said there is another way out of the crisis, which is to impose even more spending cuts instead of tax hikes.

Aguirre made her remarks amid growing concerns among some circles within the PP about the impact of Rajoy’s policies on the public ahead of local elections. A poll carried out by Metroscopia for EL PAÍS and published on Wednesday showed that if regional elections were held in Madrid today, the result would be a hung parliament for the first time in 10 years, with the PP losing its absolute majority.

In an entry on her personal blog titled “Yes, there is an alternative,” Aguirre, a lightning rod for the views of the liberal faction of the ruling party, and a politician who has had a number of run-ins with Rajoy, urged the government to return to the path laid out in its campaign for the November 2011 general election, in which the party won an absolute majority.

Rajoy had pledged not to increase taxes during that campaign, but subsequently hiked both corporate and personal income taxes as well as value-added tax rates in a series of austerity plans, arguing that there was no other way to reduce the public deficit. The government also took an ax to the public sector, cutting wages, freezing pensions and laying off workers, as well as imposing drastic cuts on regional health and education spending.

While agreeing that reducing public services should be a priority for the government, Aguirre, who is noted for speaking her mind in a way that often attracts headlines, argued that the “experience of the past few months has shown that these [tax] hikes have not served to increase revenues.”

The former Madrid premier pointed to the sharply negative macroeconomic previsions unveiled by the Cabinet last Friday, in which the government revised its forecast for economic growth for this year from a decline of 0.5 percent to one of 1.3 percent, and its prediction of a jobless rate of 27 percent.

Rajoy also wants Brussels to approve its demand for two more years to bring the public deficit back within the European Union ceiling of three percent of GDP.

Under the new fiscal stability plan, the government is planning to unveil budget savings of three billion euros this year, including 800 million euros in new taxes on consumption.

Aguirre said the government had to act to stem a growing sense of pessimism among the public about pulling the country out of the “economic hole” in which it finds itself, and suggested the way to do this was the time-worn conservative recipe of eliminating crowding out by severely reducing the weight of the state in economic activity.

“The time has come to look at the other factor: the reduction in spending that formed part of the PP’s campaign and brought it a resounding majority,” Aguirre said. “This means undertaking a radical overhaul, of unprecedented dimensions, of administrations. And this indeed is an alternative. The time has come to apply it: reduce the weight of the public sector so that money gets to businessmen and families to pull Spain out of the crisis.”

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