debt crisis in spain deflation in spain house prices in spain iva in spain iva increases on spanish property a
The Spanish government recently announced new measures designed to combat the huge national debt crisis in Spain that is in danger of overwhelming the country in much the same way as Greece.
Public sector workers will see their wages slashed by 5% this year, while their pay will be frozen in 2011. The baby bonus of €2,500 given to new mothers will also be abolished.
These measures will run alongside the increases to iva (similar to UK vat), from 7% to 8%, and on the upper rate from 16% to 18% that are due to come into force at the end of June.
Some critics are laying into the Zapatero government, claiming that these measures are too late and too severe, that the looming crisis should have been spotted some time ago and addressed in stages so as to minimise the financial impact on ordinary working-class Spaniards.
Concern exists that rather than relieving the debt crisis, these measures may in fact lead to the majority of people tightening their belts and putting an end to any type of unnecessary spending. There are already real fears of deflation in Spain, and this type of cycle could ultimately prove to be too big a burden for the nation to carry.
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