Spain passes в18 billion fiscal plan
MADRID: The Spanish government approved Friday \18 billion of emergency tax cuts and spending to shore up an economic expansion undermined by a slumping housing market and the global credit shortage.
The measures, to be enacted immediately, will provide a \400 tax rebate to all workers and pensioners, part of \10 billion of outlays this year. The remaining \8 billion is earmarked for next year.
Prime Minister Jose Luis Rodriguez Zapatero is tapping a budget surplus to cushion the effect of a slowing economy, which the International Monetary Fund forecasts will ease by more than half this year to 1.8 percent. House prices in Spain fell in real terms for the first time in 10 years in the first quarter after tripling in the past decade.
“The economic and budget policy of this government in the last four years has allowed us to accrue a surplus in the public accounts,” the deputy prime minister Marнa Teresa Fernбndez de la Vega said at a press conference in Madrid. “This lets us take measures to stimulate the economy, to reinvigorate job creation and to help people and families in greatest difficulty.”
The measures will add 0.2 or 0.3 percentage point to economic growth this year, Finance Minister Pedro Solbes said at the same press conference.
The global credit crunch stemming from the collapse of the U.S. housing market is exacerbating Spains housing slump by restricting funds available for banks and home buyers. Mortgage lending fell 28 percent on the year in January.
“If this episode is prolonged, its effects on the Spanish economy may be significant, since it is an economy in which external financing is a basic element of its growth,” the Bank of Spains governor, Miguel Бngel Fernбndez Ordусez, said this week. “That the real estate cycle matured at the same time as international financial tensions emerged has been particularly unfortunate for our economy.”
One measure included in the stimulus package ends the fees charged by banks and notaries to extend a mortgage, making it cheaper for home owners to lower their payments by stretching out the life of the loan. The government also abolished the wealth tax and announced a \200 million program to help unemployed construction workers find jobs.
Home sales imploded in the first quarter, declining 23 percent on the year. That left the stock of unsold homes in Spain at more than 600,000, according to Alberto Espelosнn, a strategist at Ibercaja Gestiуn.
The Ministry of Public Works has accelerated its tendering process already this year, Solbes added. The ministry awarded \6 billion of contracts in the first quarter, almost double the amount in the year-earlier period.
