Thursday, October 14, 2010

EU austerity drive country by country

For EU leaders the short-term goal is to restore confidence in the euro.A new austerity drive has been sweeping across Europe, as governments struggle to trim huge budget deficits and the 16-nation eurozone races to reassure sceptical markets. Some of the biggest protests have been seen in France but industrial action is making headlines elsewhere too.With all EU governments aiming for maximum budget deficits of 3% of GDP by 2013, what belt-tightening measures are they taking?

France has announced plans to cut spending by 45bn euros over the next three years in order to meet the budget deficit target. Some of this money is expected to be saved through closing tax loopholes and withdrawing temporary economic stimulus measures. The country also plans to save money through reforms to the pensions and tax systems. Measures include raising the retirement age to 62 from 60, and require employees to work longer to qualify for their state pension. The highest earners will also be required to pay an extra 1% income tax.Trade unions organised two rounds of nationwide strikes in September, with at least 1.1 million people involved in the first of these.

The Spanish government has approved an austerity budget for 2011 which includes a tax rise for the rich and 8% spending cuts.Madrid has promised European counterparts to cut its deficit to 6% of its gross domestic product (GDP) next year, from 11.1% last year.Government workers face a pay cut of 5%, starting in June, and salaries will then be frozen for 2011. A tax rise of 1% will be applied to personal income above 120,000 euros. Smaller savings include an end to a 2,500-euro cash payout for new mothers, known as "baby cheques". Unemployment has more than doubled - to about 20% - since 2007.


The Greek government has pledged to make drastic spending cuts and boost tax revenue in return for a 110bn-euro (£95bn) bail-out from the EU and International Monetary Fund.It has started drawing on the bail-out money because a sharp downgrade of its sovereign debt rating made its borrowing costs soar.
The aim is to slash the budget deficit from 13.6% of GDP.The country has started cracking down on tax evasion, and on corruption within the tax and customs service. It will also curb its widespread early retirement schemes. The average retirement age is set to rise from 61.4 to 63.5. Under the plan to slash the budget by 30bn euros (£26bn; $37bn) over three years Greece aims to: scrap bonus payments for public sector workers; freeze public sector salaries and pensions for at least three years; increase sales tax (VAT) from 19% to 23%; raise taxes on fuel, alcohol and tobacco by 10%. The harsh measures have triggered public sector strikes and violence on the streets of Athens.

The government proposed wage cuts of 25% and pension cuts of 15% in July in order to reduce the country's budget deficit.Romania's economy shrunk more than 7% in 2009 and it needed an IMF bail-out in order to meet its wage bill.It says it needs to implement new austerity measures to qualify for the next instalment of the 20bn-euro ($25bn; £17bn) IMF loan.Angry protests have greeted the cuts and Interior Minister Vasile Blaga resigned after thousands of police officers went on strike over the 25% pay cut.

The Italian government has approved austerity measures worth 24bn euros for the years 2011-2012. The cuts amount to about 1.6% of Italian GDP Italy aims to cut public sector pay and freeze new recruitment. Public sector pensions and local government spending are also being targeted, and there are plans to crack down on tax evasion. Funding to city and regional authorities is expected to be cut by more than 13bn euros.
For the next three years there will be a freeze on public sector pay rises and cuts in public sector hiring, replacing only one employee for every five who leave.Progressive pay cuts of up to 10% are planned for high earners in the public sector, including ministers and parliamentarians.Retirement will be delayed by up to six months for those who reach retirement age in 2011.Provincial governments serving fewer than 220,000 inhabitants will be scrapped, as will several publicly funded think-tanks.


The new UK coalition government has announced £6.2bn (7.2bn euros) of savings in 2010-2011, making it clear that this is just the first step in an austerity drive aimed at cutting the huge deficit of £156bn, which is above 11% of GDP.The biggest of all the departmental cuts will be at the Department of Business, Innovation and Skills, totalling £836m. David Cameron's government hopes to make big savings by delaying or stopping government contracts and projects, by cutting consultancy and travel costs and by slimming down public sector agencies known as quangos.

The German government has proposed plans to cut the budget deficit by a record 80bn euros ($96bn; £66bn), or 3% of GDP, by 2014. The total deficit in 2009 was 3.1%, but is projected to grow to more than 5% this year. "Germany has an outstanding chance to set a good example," said German Chancellor Angela Merkel. The plans include a cut in subsidies to parents, 10,000 government job cuts over four years, and higher taxes on nuclear power. The rebuilding of the baroque Stadtschloss palace in the heart of Berlin will also be postponed.


The Irish government has presented three austerity packages in just over a year.In December 2009, the budget for 2010 slashed government spending by 4bn euros, cut all public servants' pay by at least 5% and reduced social welfare.The measures include cuts of 760m euros in social welfare and 960m euros in investment projects.Child benefit is being cut by 16 euros a month, bringing the lower rate to 150 euros a month and the higher rate to 187 euros a month. A carbon tax has been brought in, set at 15 euros per tonne of CO2.The Irish government has had to give staggering amounts of support to its struggling banking sector - the equivalent of 30% of the value of its economy. Including that financial aid, the Irish deficit will be 32% this year - 12% without. The government aims to cut it in stages, to reach 2.9% by 2014. Bad news came in September when figures showed the economy had shrunk in the second quarter from the previous three months.Gross domestic product (GDP) fell 1.2% and gross national product (GNP), seen by some as a more accurate barometer of the economy, fell by 0.3%.


The Socialist government of Jose Socrates has announced a range of austerity measures aimed at cutting the deficit to 7.3% this year and 4.6% in 2011.Top earners in the public sector, including politicians, will see a 5% pay cut.VAT will rise by 1% and there will be income tax hikes for those earning more than 150,000 euros. By 2013 they will face a 45% tax rate. 2013 military spending will have been cut by 40% and the government is delaying the launch of two high-speed rail links - the Lisbon-Porto and Porto-Vigo routes.


The Dutch caretaker government announced budget cuts of 3.2bn euros (£2.7bn, $4.2bn) for 2011, but the final figure may be much higher. Spending on healthcare, immigrants and government workers will all be slashed in a bid to reduce the budget deficit.The head of one of the parties trying to form the next government foresaw cuts of 18bn euros over four years.Talks on a new government have dragged on for months.

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