Public spending cuts planned to curb inflation

31st March 2006, Comments 0 comments

31 March 2006, MADRID — The Spanish government is to moderate public spending in an effort to curb inflation and reduce the deficit.

31 March 2006

MADRID — The Spanish government is to moderate public spending in an effort to curb inflation and reduce the deficit.

Pedro Solbes, economy minister, said another main reason for reigning in public spending is to try to keep domestic demand under control.

Despite being one of the principle motors of the booming Spanish economy, domestic demand, allied with rising energy prices worldwide, may cause its long-term decline of the economy.

Solbes added that rising prices and national deficit are also causes for concern.

He said the government will only raise public spending "moderately" in line with the GDP.

The government is hoping to repeat a public accounts surplus, which was achieved for the first time last year.

Solbes also hinted at a reform in mortgages deals to moderate the rise of interest rates.

His comments came has the Euribor, which is the principle method used to fix mortgage rates in Spain, rose above 3 percent in March – for the first time since 2002.

Many Spaniards have variable rate mortgages so if interest rates go above 4 percent, as has been predicted this year, then mortgage rates will rise accordingly.

Solbes said the proposed changes would give families a bigger "margin for manoeuvre" in terms of their mortgages.

The reforms are also to give greater transparency in mortgage deals and to give the buyer more information to choose the best offer so they can foresee possible consequences. 

Solbes said the changes may reduce costs of changing mortgage deals to increase competition in the mortgage sector.

He said the government would encourage more investment mortgages to allow pensioners to make more money from property.

They would be allowed to take out mortgages using current properties as guarantees.

[Copyright EFE with Expatica]

Subject: Spanish news


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