The government of Spain today released its 2013 budget and outlined the economic reforms it will take to meet the conditions that are sure to be imposed on the country if it should seek a bailout from the European Central Bank. The budget proposals include spending cuts and tax increases to lower the country’s fiscal deficit to 4.5% of GDP. The deficit is expected to reach 6.3% in 2012.
Spending on social programs will amount to 63.5% of the country’s 2013 budget and the government will take €3 billion from its pension fund to help meet expenditures. Next year’s GDP is expected to contract by 0.5%, an amount the budget minister called “a soft recession.”
Cuts to spending will amount to 0.77% of projected GDP, while tax increases will be worth another 0.56%. Government ministries will all suffer an 8.9% cut to their budgets next year.
Street demonstrations over the past few days have highlighted public opposition to more austerity and spending cuts. And even if the government is able to put its plan into practice, there are still plenty of doubters that Spain can meet its deficit targets for either this year or next. The government really is trapped between a rock and a hard place — but it really has no other choice.