Echoes of the crisis
Friday 30 March 2012
Greece still has to cut spending by €12 billion in 2013 and 2014: The Greek government that will emerge from the early general elections at the start of May will have to continue consolidating public finances and cut spending by €12 billion in 2013 and 2014, warned the prime minister, on 30 March. Greece pledged to reduce its public spending by €12 billion in 2013 and 2014, in return for the new loan granted by the eurozone and the IMF, Prime Minister Lucas Papademos told parliament, answering questions by MPs on the economy. He added that “studies are being conducted to identify where spending will have to be cut and will be finalised before the current government’s mandate expires, so that the next team can adopt decisions”. “Every effort must be made to limit wasteful spending and not to further burden the salaries of civil servants,” explained Papademos.
French deficit cut surpasses projections: The larger-than-expected reduction of the French public deficit in 2011 is “excellent news,” observed Finance Minister François Baroin, on 30 March. He hailed “a very encouraging effort by the French”. “I am happy to arrive in Copenhagen with excellent news. We are in advance on our reduction of the public deficit, with a half-point more than anticipated,” he said upon arriving for a meeting of eurozone finance ministers in Denmark. France cut its public deficit to 5.2% of GDP in 2011. The government had promised its European partners to meet the target of 5.7%, before announcing in late January that the 2011 deficit might be even lower, at 5.4% or 5.3%.
Madrid unveils a budget of unprecedented austerity as European concerns grow: Just hours after a general strike accompanied by huge demonstrations, Spain presented, on 30 March, its draft budget for 2012, expected to be the most rigorous of its history. Meanwhile, concerns are growing in Europe about the situation in Spain. The government has taken on the task of bringing the public deficit down from 8.51% to 5.3% of GDP within 12 months. To succeed, it initially estimated that it would need to find €35 billion in spending cuts and new revenues, but the figure will certainly be higher due to the recession, which will probably reduce Spain’s GDP by 1.7% this year. “It will be about €50 billion, maybe even a bit more,” Soledad Pellon, analyst at the brokerage house IG Markets, told
AFP. Moody’s rating agency estimates the figure at €41.5 billion, while Funcas, the think tank run by the Spanish savings banks foundation, puts the total at €55 billion. After announcing budget cuts of €8.9 billion and tax hikes of €6.3 billion, Madrid will still have to find another €30 to 40 billion. The budget will therefore be “very severe,” warned Mariano Rajoy, Spain’s Conservative head of government.
Portugal to issue 18-month bonds for first time in a year: Portugal’s debt agency announced, on 29 March, that it plans to issue 18-month bonds on 4 April, for the first time since Portugal sought financial aid from the European Union and the International Monetary Fund, in April 2011. The public credit management institute (IGCP) intends to raise €1.25 billion to €1.50 billion in six to 18-month treasury bonds, it announced in a statement, confirming the government’s intention to phase in longer-term borrowing. The bonds, maturing in October 2013, represent the longest-term issue since the floating, on 9 March 2011, of 30-month treasury bonds, the debt agency told
AFP. During the second quarter of the year, the IGCP plans to raise another €2.5 billion to €3 billion in six and 12-month treasury bonds, according to the programme, announced on 29 March.
“Every effort must be made to limit wasteful spending and not to further burden the salaries of civil servants,” explained Papademos