Spain continues to struggle against debt problems
Jeremy Hobson: Now to Spain, where government borrowing costs have reached a five month high. The country seems to be ready to replace Greece as the new star of Europe’s debt crisis.
The BBC’s Tom Burridge is with us now from Madrid with more. Good morning.
Tom Burridge: Good morning.
Hobson: So borrowing costs have now reached the highest level in Spain since December. What’s going on?
Burridge: Essentially, we had a general strike in Spain last week. Then we had this new budget from the government: 27 billion euro’s worth of savings, 17 percent cuts across government department budgets; and huge tax increases — things like income tax are going up and the cost of gas and electricity. This was essentially the government’s plea to the markets to say, actually, we’re going to get our budget deficit in order. And they were hoping, I guess this week, that these bond auctions would go more favorably than they did.
Hobson: Are the Spanish willing to do what it sounds like the international lenders want them to do to get their debt under control, or not?
Burridge: Talk to most people on the streets, and the answer is “no.” Essentially, most Spanish people want less austerity from the government; they want a hands-off approach to things like health, education — their public systems here in Spain. But the government is committed to this program of austerity.
Although, you’ve got people like Mario Draghi — he’s the president of the European Central Bank — coming out since these bond auctions saying actually, what the markets are asking is for more from Spain, and a lot of economists feeling that if you look at the projections of the Spanish economy this year, that it’s expected to contract by one to two percent; it could be worse than that. And if I it is worse than that — if the economy contracts more than is expected this year — it won’t hit that target, it won’t reassure the markets, and it won’t do what it’s aiming to do.
Hobson: Tom, one word answer here: Is Spain’s debt crisis getting better or worse?
Burridge: It’s getting worse at the moment.
Hobson: The BBC’s Tom Burridge in Madrid. Thanks a lot.
Burridge: Thank you.
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