Spain’s Catalonia Considers Cutting Public Wages, Tax Increases -

 

Spain’s Catalonia Considers Cutting Public Wages, Tax Increases.Says Germany Sees No ‘Bazooka’ in Crisis as Spain Yields Surge Spain Pays More to Borrow Than Greece as Rajoy Appeals to Europe Merkel Ally Says Spain Should Tap EFSF for Any Financial Help Spain’s Rajoy to Oust Socialists, Win Majority, Exit Poll Says By Angeline Benoit Nov. 22 (Bloomberg) -- Catalonia, the wealthiest of Spain’s 17 semi-autonomous regions with an economy the size of Portugal’s, may cut public wages and raise taxes and tariffs in 2012 as it tries to meet the nation’s budget deficit target. Catalan President Artur Mas announced possible cost-cutting measures today before the presentation of the region’s 2012 budget in the coming weeks, according to a spokeswoman for the finance department, who declined to be named in line with the region’s policy. No figures were provided, she said by phone. Regions control more than a third of Spain’s public spending, including health and education, and may contribute to the Spanish government missing its budget-deficit target of 6 percent of economic output in 2011. Catalonia cut spending 10 percent this year and pledged to meet a 1.3 percent deficit target in 2012 as the nation struggles to avoid a bailout while its borrowing costs surge amid contagion fears from Europe’s debt crisis. Catalonia is examining cutting the wages of 231,000 employees working for the region and public-sector entities next year, instead of dismissing workers, and may scrap Christmas bonuses of a full month’s pay for about 400 regional executives, the department spokeswoman said. The region is also considering increasing university fees, public transportation and water tariffs, and charging patients for medical prescriptions. Government Change Catalonia is ruled by the regional CiU nationalist party. Its pro-business policy is similar to the program defended by Spain’s People’s Party, which beat the ruling Socialists in a national election on Nov. 20 and will control the central government as well as 11 of Spain’s regions when it takes over in December. Rajoy, who has pledged to cut the nation’s deficit to 4.4 percent of GDP next year come what may, has been greeted by a surge in borrowing costs. Spanish three-month bills were auctioned today at higher yields than in Greece and Portugal. The yield on Spain’s 10-year benchmark rose to 6.6 percent, resuming its climb toward a euro-era high of 6.78 percent reached on Nov. 17. The gap between Spanish and German 10-year borrowing costs widened to 469 basis points. Catalonia had Spain’s third-largest budget gap in 2010, at 3.86 percent of its gross domestic product. It also had the second-highest debt, at 19.2 percent of GDP in the second quarter. Albert Carreras de Odriozola, Catalonia’s state secretary for economy, said on Sept. 22 that the region aimed to beat its budget-deficit forecast of 2.66 percent of GDP this year to reassure investors. The region turned to offering debt to retail investors last year as an alternative to tapping the market. It sold 4.2 billion euros ($5.7 billion) of bonds on Nov. 15 at 4.75 percent for one-year paper and 5.25 percent for two-year securities.