Spain: Cabinet approves 65 bln austerity plan

Deputy Premier Soraya Sanz de Santamaria today justified the government's 65 billion euro austerity plan, saying ''Spain is going through one of the most dramatic moments in its history. The government must act with toughness and realism.'' Speaking to reporters after today's Cabinet meeting, the Deputy Premier listed several measures that will take effect immediately, in compliance with EU-mandated deficit reduction objectives, in exchange for a first 30-million-euro tranche of the EU banking bailout aid package, which totals 100 million euros. These include cuts in leave and year-end wages for the country's 3 million public employees, the liberalization of working hours as well as air and train transportation, cutting sales periods, and stiffening criminal penalties for fraud. Another measure, which has been strongly opposed by environmentalist groups, extends permits for building homes on the beach to 75 years, and excludes 11 areas that are ecologically at risk from the country's public sea and land domain. Also this month, the government will approve a new measure to eliminate the current 25% deficit in electricity rates, Sanz de Santamaria said. A 3-point increase in the VAT tax, to 21%, will go into effect on September 1 to spare the current tourist season, Finance Minister Cristobal Montoro said at the same press conference today. Montoro also confirmed the 600 million euro cuts to ministerial budgets, and a future reform of the pension system that will limit early retirement. The cuts in public employee year-end wage packets will be recovered in the 2015 pension plan, the minister said. The two ministers also confirmed a cut in subsidies for the newly unemployed beginning in the 7th month, no more tax breaks for first-time homeowners as of 2013, a 30% reduction of councillors in public institutions, and the introduction of quality control of public services by the central administration. Towns with less than 20,000 inhabitants that do not come to quality control standards will have to give their administration over to states and provinces. (ANSAMed).