Ambrose Evans-Pritchard
The Daily Telegraph
May 28, 2010
Prime Minister Jose Luis Zapatero had to rely on the abstention of
Catalan nationalists to push through public sector wage cuts
Photo: REUTERS
Its glaring lack of political solidarity is the latest sign of rising resistance to deflation policies across the eurozone.
Prime minister Jose Luis Zapatero had to rely on the abstention of Catalan nationalists to push through public sector wage cuts of 5pc this year and a freeze in 2011.
The 1930s-style pay squeeze was effectively imposed upon Spain by Brussels as a quid pro quo for the EU’s €750bn “shield” for eurozone debtors. It is a bitter climb-down for a workers party that vowed to resist salary cuts. Public sector unions have called a strike on June 8 to protest an act of “ultimate aggression” against the people.
The conservatives voted against the measures, prompting a fiery rebuke from finance minister Elena Salgado. “Unpatriotic, irresponsible, and hardly very European: one day they will pay for this,” she said.
The measures include cancellation of the €2,500 "baby cheque" and lower pension benefits. Mr Zapatero hopes to cut the deficit by an extra 1.6pc over GDP over two years, though unemployment is already 20pc. The deficit will fall from 11.2pc in 2009 to 6pc this year.
Raj Badiani from IHS Global Insight said cuts may not be enough. The government is relying on growth projections that are "far too optimistic" to do the heavy lifting of the deficit reduction.
In Italy, the main CGIL trade union is launching two sets of strike in June to protest "unjust and unsustainable" cuts announced on Tuesday night, claiming that axe falls squarely on ordinary workers. "Those who earn over €500,000 won't have to put up a single cent," it said.
Premier Silvio Berlusconi said the sovereign bond scare sweeping the eurozone had forced Italy to build up a security buffer. "This crisis has been provoked by speculation and is like no other. These sacrifices are necessary to save the euro," he said.
The €24bn austerity package (1.6pc of GDP) over two years aims to cut the bloated bureaucracy, chiefly by reducing grants to regional governments.
"Italy's spending is out of control: this irresponsible system worked as
long as we could devalue the currency," said Mr Berlusconi. "
