Editor’s note: This article was first published in December 2011, as news commentary from 30 December 2011 on the first measures of Mariano Rajoy’s newly formed government: the wage freeze, a temporary tax increase, the abolition of the digital levy and the Ley Sinde regulations.
A few months ago we published an article expressing our doubts about some of the promises Mariano Rajoy had made during his election campaign. I have always said that no country can cut taxes during a recession, even though Rajoy claimed not only that he wouldn’t raise them, but that he would actually lower them to boost consumption. Well, it didn’t take long: among the government’s first measures to get us out of the crisis are a wage freeze and a tax increase.
Granted, the tax increase is temporary (until the crisis ends), which, at this rate, could mean indefinitely. It doesn’t take me by surprise, because it’s simple arithmetic, but for many Spaniards it will come as a bucket of cold water, as they are going to lose a lot of purchasing power. Still, don’t worry: other measures will follow that you’ll probably like even less.
Some good, some bad
Not everything about the new government’s management so far is bad: it has abolished the canon digital (a levy on blank media and recording devices), although in exchange it has approved the Ley Sinde (Spain’s anti-piracy law). That shouldn’t come as a surprise either, since a WikiLeaks cable had already announced that Spain’s Ley Sinde, like the US SOPA, would be passed no matter what.
Only yesterday we reported that Spain would finally be helping entrepreneurs, and I was delighted to share that news. But in light of the measures approved today, the truth is that with potential consumers losing purchasing power, consumption in Spain will remain in the doldrums.
As we said in our previous article:
Healthcare, education, unemployment benefits, pensions and taxes. Within 14 months, at least two of these “sectors” will have to be touched, because otherwise the public accounts won’t add up. Either Mariano Rajoy has an ace up his sleeve or he will have to break two of his election promises.
The first one has already been touched. Which will be the second?
Featured image: European People's Party, CC BY 2.0, via Wikimedia Commons.
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