MADRID (AP) — Spain’s new conservative government will crack down on tax evasion and trim the public sector in its drive to chip away at a bloated budget deficit, an official said Thursday.
Word of the new measures came a week after the government announced a €15 billion ($19.4 billion) package of spending cuts and tax hikes.
Personal and corporate tax returns will be scrutinized more closely, tax inspectors will visit workplaces more often to ensure workers are being paid through the payroll, and the government is considering setting a limit beyond which some transactions cannot be carried out in cash, government spokeswoman Soraya Saenz de Santamaria said after a Cabinet meeting.
She said the government hopes to raise nearly €8.2 billion in 2012 in extra revenue with the anti-tax fraud initiative.
Saenz de Santamaria also said Spain’s different levels of government — central, regional and local — will be pressed to eliminate a large chunk of the 4,000 or so companies, agencies and other organizations they own. A goal set in 2010 to eliminate 515 of them to save money has fallen far short of expectations, with only 69 dissolved.
The central government will soon convene a commission representing all three of those levels of government to determine the cause of this failure and raise the 515 figure, she told a news conference.
The conservative Popular Party took power the week before Christmas after winning a landslide election win on Nov. 20 and one of its main priorities — besides fighting a 21.5 percent jobless rate — is to make sure Spain doesn’t get dragged into the debt crisis mire that has already forced Greece, Ireland and Portugal into seeking financial bailouts and is now threatening much-bigger Italy.
Though Spain’s budget deficit is higher than the 3 percent threshold that was supposedly part of the euro’s economic framework, it has so far avoided the same sort of bond market pressure afflicting Italy, partly because its overall central government debt burden is relatively low at around 66 percent — Italy’s is around 120 percent. Last week, the government said overspending in Spain’s regions was responsible for most of an upward revision to Spain’s 2011 budget deficit to around 8 percent of GDP from the 6 percent forecast by the last, Socialist government.
The yield on Spain’s benchmark ten-year bonds closed out 2011 at just over 5 percent, lower than Italy’s 7 percent, a rate that is widely-considered to be unsustainable in the long-run. However, in the first few days of the new year the Spanish yield has risen past 5.5 percent amid dismal economic growth forecasts.
Spain has to keep a lid on its borrowings especially with unemployment so high and its regions and the private sector so indebted. Spain crawled out of nearly two years of recession in 2010, but the economy slowed this summer and growth was outright flat in the third quarter of this year.
Earlier Thursday, the new economy minister was quoted as saying the government expects the country’s banks to find up to €50 billion ($65 billion) to shore up balance sheets weakened by exposure to a burst real estate bubble.
Luis de Guindos told The Financial Times in an interview that this had to be done without posing a burden for public finances. That indicates that the government will be loathe to put more money into cash-strapped banks.
He said most of the country’s banks could raise the money through their own earnings, while weaker lenders — such as savings banks called ‘cajas’ — could be absorbed in a new wave of consolidation.
The Bank of Spain says the country’s financial sector holds about €176 billion ($228 billion)in bad loans or other toxic assets from the real estate sector. That is just over half of the sector’s property-related exposure.
In a previous round of restructuring over the past two years or so, Spanish banks have set aside billions in provisions to cover non-performing loans or repossessed property.
De Guindos was also reported as saying that the government plans strict new controls over the budgets of Spain’s 17 semiautonomous regions. He said that under a new law to be passed in March, regional spending blueprints will need approval from the central government before they can be enacted.
More Related Stories
- Mississippi could begin prosecuting women for miscarriages
- Teenage girl claims she was beaten up for looking like Taylor Swift
- UK Military: London attack victim was a "model soldier"
- Billionaire hedge funder: Babies, breast-feeding "kill" focus, keep women from succeeding
- "Bookless library" set to open in Texas
- 2 more arrested in London attacks
- Glenn Beck: CNN interview with atheist tornado survivor was a setup!
- Incoming BBC news director on journalism gender gap: "We can do better"
- Illegal construction, shoddy materials at fault in Bangladesh factory disaster
- Ahead of Obama's speech, U.S. acknowledges four American drone killings
- Must-see morning clip: Bill O'Reilly visits "The Daily Show"
- Lawsuit alleges anti-gay hiring practices at ExxonMobil
- Boy Scouts poised to vote, still greatly divided on gay youth
- House supporters of KXL received $56m from fossil fuel industry
- 80-year-old becomes oldest to climb Mount Everest
- Before FBI shooting man implicated self, Tsarnaev in triple murder
- Paul McCartney backs Pussy Riot
- UK emergency committee convenes after attack
- Brave scout leader tried to reason with London attackers
- If Alex Pareene were a cable news executive...
- El Salvador court delays ruling on abortion case while woman's life hangs in the balance
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11