Minister De Guindos unveiled yesterday in Congress the impact of some of the cutbacks that the Spanish government will apply to the 2012 Budget. Investments will be trimmed 40% this year. By way of comparisons, they were trimmed 38.3% in 2011. Public consumption will be cut 11%.
This will be echoed in already-dropping GDP data. In fact, the think tank Fedea said yesterday that the Spanish economy has already dropped by 2%. Messages like this indicate that business fell during the past year.
Still, it makes sense that inflated public spending should be trimmed and that investments would be reduced, especially after all the spending on infrastructure. This spending cut will have to also affect R&D.
Once the government cleans up its accounts and has credit, the private sector will start taking some initiative.
