Spain announced a package of spending cuts and tax increases Friday after the new government said the budget shortfall is deeper than the outgoing administration had led it to believe. Meaningful structural reforms have yet to be proposed, and the full extent of the cuts is unlikely to be made known until after regional elections in late March. –ARK

The Guardian:

The principal measure comes in the form of an €8.9bn budget cut spread across all government departments. There are also across-the-board income tax increases and for home-owners, a one-year freeze on public sector salaries, a freeze on the minimum wage of €641.40 a month and cuts in subsidies to trade unions and political parties. Pensions, as promised, will rise by 1% next month, and the cut-off point for unemployment benefit is to be extended for a further six months.

… Income tax on salaries of €9,500 will rise 0.75% and by up to 7% on incomes above €300,000.

… Amid all the austerity, there were no measures that appeared to be designed to boost productivity or dent Spain’s crippling 23% unemployment rate. Indeed, the spending cuts seem certain to lead to job losses. [Vice President] Sáenz de Santamaría, who gave birth to her first child six weeks ago, also announced the suspension of plans to extend paternity leave to one month until 2013.

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