Zapatero pledges tax cuts and state pension hike

5th September 2005, Comments 0 comments

6 September 2005, MADRID — The Spanish prime minister has promised to cut taxes and raise state pensions considerably over the next two years.

6 September 2005

MADRID — The Spanish prime minister has promised to cut taxes and raise state pensions considerably over the next two years.

On the back of figures which showed the Spanish economy had grown at an annual rate of 3.4 percent this year, Jose Luis Rodriguez Zapatero said he would cut taxes and spend more cash on healthcare, housing and education.

Spain showed a cash surplus of EUR 7.4 billion in the first seven months of the year.

Tax cuts for low income earners will come into force in 2007, while the minimum state pension for 3m Spaniards will be increased significantly from next year.

Meanwhile, corporate taxes, currently at 35 percent, will come down after the other tax reductions have been brought in.

However, these promised economic changes may be jeopardised by a political row between Madrid and the regional governments over who pays for healthcare.

Spending on healthcare has risen significantly since the 17 regions took over responsibility for managing hospitals and primary and health clinics in 2002. Currently, the government finances the entire EUR 45bn cost of the service.

The regions argue Madrid is short-changing them because it does not take into account the huge rise in the population which has grown 10 percent  over the past five years with 4m new immigrants to Spain.

The regions are now EUR 5bn in debt on healthcare, mainly to pharmaceutical companies, and they want Madrid to bale them out.

Zapatero, who heads a minority Socialist government, will depend on regional parties for support to get through the 2006 budget in December.

But Madrid wants the regions to share the burden and refuses to take up the healthcare shortfall.

[Copyright EFE with Expatica]

Subject: Spanish news

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