Spain defends cost-cutting reform of public services

Spanish Economy Minister Luis de Guindos defended Tuesday plans to find efficiency savings of 10 billion euros ($13.8 billion) a year in healthcare and education. The government announced the measure in a press release late Monday, which was swiftly attacked by the main opposition Socialist Party and unions who argue it will lead to a sharp deterioration in the quality of public services. "The reform of health and education services are unavoidable but not to save 10 billion euros; it is unavoidable to guarantee the sustainability of public health and education in the medium- and long-term," the minister said. "Spaniards must be absolutely convinced that they will continue to have a quality public health and education system and that its sustainability will be guaranteed for the next decade," he added at a business conference. The savings which the government expects to make through its reform of public services are on top of the 27 billion euros in spending cuts and tax increases included in its 2012 budget. The announcement of the public service reform comes as Spain's borrowing costs have risen due to market worries over the country's ability to rein in public spending, but the minister rejected there was any link. "I would not see it as a response to a (specific) situation in the markets. They are structural reforms which are going to produce results over the next five to ten years," he said. The government will approve the reform of the country's public health and education systems later this month, De Guindos said. "It is going to be done very, very quickly," he stressed. Spain 17 autonomous regions are responsible for providing education and healthcare and they are at the heart of investor concerns over the country's ability to slash its public deficit to the EU limit of 3.0 percent of GDP in 2013 from 8.5 percent last year. But some analysts have already cast doubt on the government's plans to save 10 billion euros by reforming public services. "It will be rather difficult to generate the targeted efficiency gains in the health and education sector in a short period of time," Citigroup said in a research note on Tuesday. The government has not outlined how it intends to reform public services, saying only Monday that it would seek to eliminate overlaps and ensure "a greater rationalisation." Budget Minister Cristobal Montoro said the details of the reforms will be ready within two weeks so as to be included in the budgets this year of the regional governments. "They are ambitious reforms," he said during an interview with public radio RNE. The European Commission welcomed Spain's 2012 budget, the country's most austere since it returned to democracy following the death of dictator Francisco Franco in 1975. "We have a positive view regarding this first budget," Olivier Bailly, a spokesman for the European Union's executive arm, told a news conference in Brussels on Tuesday. Commission experts have conducted a preliminary analysis but now need to see the budgets of Spain's autonomous regions as well as the country's social security regime before deciding if more efforts are required, Bailly said. "We hope to have these elements by the end of the month," he added.