The new Popular Party (PP) government has given us a full New Year’s package of goodies. Don’t you believe that Mariano Rajoy and his team knew way before the November 20th elections that they would have to raise taxes to get Spain’s finances back into shape? This was the important ingredient in the recipe dictated by German Chancellor Angela Merkel when she spoke to Rajoy on several occasions before his victory.
The worst thing is the PP leader, now prime minister, continued to insist that he would not raise taxes. He even criticised former Prime Minister José Luis Rodríguez Zapatero in September for introducing a wealth tax for the next two years to rake in some extra revenue from Spain’s most fortuitous families. Reaffirming that this wasn’t the time to give Spaniards an added blow to their pocketbooks, Rajoy insisted on abolishing the wealth tax once he got to Moncloa. Good pre-election campaign propaganda and voters apparently fell for it. It was George Herbert Walker Bush’s “read my lips” all over again.
When announcing the tax hikes last Friday, Deputy Prime Minister Soraya Sáenz de Santamaría pretended to be extremely apologetic. “This is an exceptional move that we didn't foresee,” Sáenz said at a news conference following the Cabinet meeting. “We had to resort to this because the previous government did not comply with its goal in reducing the deficit.” In other words, the Socialist administration was far off target when it predicted that the nation’s deficit would be 6 per cent of GDP by the end of 2011, when Spain actually closed the year with a deficit surmounting 8 per cent. Again, this could have been no surprise to the PP. Rajoy’s party was swept into power across the regions following May‘s local elections. Officials had six months to go over the books to determine that regional finances – the gist of Spain’s economic blunders – were in dire straits. Rajoy immediately called his new regional premiers to an emergency meeting where he told them he would not tolerate any more runaway spending.
So now Spaniards are having to pay the piper. The tax hikes, which go into effect next month, range from 0.75 percent for the lowest incomes, to 7 per cent for those who make €300,000 annually. In other words, Finance Minister Cristóbal Montero explained that a single person without children with a salary of €9,500 annually won’t have to pay a cent. Those who make more than €12,000 will see a reduction of an extra €20 per year. Spaniards earning between €16,000 and €20,000 will have to fork over an additional €82 annually.
This Thursday the Cabinet is expected to announce more measures, and Economy Minister Luis De Guindos hasn’t ruled out any hike in the value added tax (VAT) in March. Even though we are paying 18 per cent – raised two percentage points by the Socialists last year – it is still one of the lowest by European standards. In all, Rajoy wants to make some €8.9 billion in budget spending cuts with the hope of bringing down the deficit to 4.4 per cent of GDP by the end of 2012 as part of his pledge to the European Commission. His goal seems unrealistic but maybe not impossible seeing that those who are going to suffer the most are taxpayers and citizens who are in badly need of social service aid.
Throughout all this economic shock therapy, Rajoy hasn’t been seen in public. He didn’t show his face during Friday’s painful announcements allowing instead his deputy prime minister to give the bad news. PP sources have said that the prime minister is waiting for the final tweaks to be put in place on all his measures before submitting himself to the opposition’s demand to appear before Parliament to explain what he did, why he did it and, of course, why he kept his plans under wraps during the election race. Here we have a new prime minister who for more than eight years could not wait to get to Moncloa, Now that his political dream came true, he is hidden away somewhere while Rome begins to burn; apparently afraid to face those voters who trusted him and the rest of the Spaniards who are demanding answers for his irreverent economic policies.
By Martin Delfin, Martin writes for the English language version of El Pais