Spain is facing 5 billion euros in additional cutbacks in order to trim its 2012 deficit goal to 5.3% of national GDP after the EU stymied the Spanish government?s attempt to raise this deficit goal to 5.8%.
After various cutbacks and tax hikes, little more can be done to balance Spain's national accounts by reducing the debt ratio from 8.5% to 5.3%. The first additional adjustment strategy that is on the table is to convert subsidies into credits so that they don't compute as expenditures.
Several types of subsidies would be involved, from Research and Design (R&D) to those related to information equipment technology and supporting business, among other programs. In all Ministries, there are some lines of credit that can be used to alleviate debt and spending loads.
The only part that would compute as spending would be interests on debt. And it is yet to be seen whether there would be loans from the national government or if the Official Credit Institution (ICO following the Spanish abbreviation) would be called upon. Alternatively, the 12.5% chunk of funds removed from Ministry's operating budget as defined by the revised 2012 National Budget would not be consistent amount all Ministries. Minister of Agriculture Miguel Arias Cañete warned on Monday that his funding is going to be cut by 25%. And it is still possible that other departments will see major cuts as well. The hardest hit will be those who have invested most in national treasuries.
Public sector payrolls and benefits
As national payrolls are cut, which is the direction that the government is going as they suppress public companies and redundant roles, if the budget presses hard, we could see changes that freeze or reduce salaries of government employees. Or if not salaries, then some other benefits they now receive.
