Spain will likely get a bailout this autumn, which hopefully will not put much more strain on the country's economy thanks to the major cutbacks the government has carried out to date.
Raising the VAT and personal income tax (known by the acronym IRPF in Spain), lowering Christmas bonuses for government workers, reducing the amount of unemployment benefits, lowering healthcare spending, delaying the retirement age and creating an aid fund for regional governments are just some of the examples that Spain can show the EU in its plea for fair treatment. Still, there is one area that the troika (the European Commission, the European Central Bank and the International Monetary Fund) could lay the hammer on if the economic team led by Luis de Guindos opts to ask for and accent a bailout: lowering pension payments for 2013.
Lowering pension payments to retired workers would be an unpopular move, especially since in doing so Rajoy's government would break yet another promise that it made during his campaign. Up until a few days ago, Rajoy had affirmed that this is the last part of the national budget that he would amend. But his room to maneuver is increasingly slim, and the possibilities of skirting a bailout seem fewer and fewer. In exchange for offering aid to Spain, the troika will apply strict quarterly control measures designed to reinforce the country's financial stability, foster a recovery of the banking industry and control the budget processes of government administrations.
There is no doubt that the oversight will be demanding, but nowhere near the draconian requirements placed on Greece. Keeping the men in black at bay, even temporarily, would be a success for the government after having to accept a bailout.
