Spain’s new government said on Friday that last year’s budget deficit would be much larger than expected and announced a slew of surprise tax hikes and wage freezes that could drag the country back to the center of the eurozone debt crisis.
In its first decrees since sweeping to victory in November, the center-right government said the public deficit for last year would come in at 8 percent of GDP, well above an official target of 6 percent.
It announced initial public spending cuts of 8.9 billion euros (US$11.5 billion) and tax hikes aimed at bringing in an additional 6 billion euros a year to tackle the shortfall.
“This is just the beginning ... We’re facing an extraordinary and unexpected situation, forcing us to take extraordinary and unexpected measures,” Spanish Deputy Prime Minister Soraya Saenz de Santamaria said.
Spain has been under market scrutiny over its ability to control its public finances, and Madrid has seen risk premiums soar to record highs on contagion fears as the eurozone debt crisis spread.
Ten days ago, the Spanish Treasury said the central government budget deficit was on course to meet a full-year target of 4.8 percent of GDP, which analysts said would push Spain’s overall public deficit above its 6 percent target for the year.
However, the scale of the overshoot took some economists by surprise and led them to forecast a deeper recession, ending the year on a downbeat note for the eurozone as a whole.
“This is a strong shock. I didn’t expect this kind of deficit increase. How can we achieve the objective using personal income taxes and capital taxes? This means making the recession much worse,” Barcelona ESADE university economist Robert Tornabell said.
While Italy’s debt mountain has been the biggest concern in financial markets in recent months, Spain had been seen as faring somewhat better. Measures taken by the previous Socialist government, while costing it the election, have kept the markets from pushing Spanish yields to unsustainable levels.
However, as recession looms across the eurozone, the new government faces a rocky few years. After Friday’s initial round of tax hikes and spending cuts, it plans to unveil a final budget for this year by the end of March.
The Socialists cut the budget shortfall from 11.2 percent of GDP in 2009, and the conservatives must take up the baton and bring the deficit down to 4.4 percent this year and 3 percent next year. If the final deficit for last year hit the 8 percent mark, as the conservatives expect, the government will need to make total savings worth more than 35 billion euros this year to meet the official target.
Spain’s economy, the fourth-largest in the eurozone, is likely to have shrunk as much as 0.3 percent in the fourth quarter, Spanish Economy Minister Luis de Guindos said this week, and many economists expect output to keep shrinking in the early part of this year.
The collapse of the property market after the 2007 global credit crunch and shrinking consumer confidence have hit the economic cornerstones of construction and services, leaving Spain struggling to grow since emerging from recession in 2010.
Now, the eurozone debt crisis and fear of an economic slump across the bloc has hit Spanish export growth, the only element of the economy to promote growth through last year.
The tax hikes announced by the conservatives on Friday, which they have always said would be counterproductive to a struggling economy, will be aimed at the country’s wealthiest.
The government froze civil servants wages, but also pledged to help the country’s poorest by raising pensions and holding electricity tariffs steady for small consumers.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”