Spain plans more public projects as construction industry picks up
Published 19/08/2010 | 05:00
SPAIN is to spend more on public infrastructure and avoid an overall increase in the tax burden, in an attempt to "facilitate economic recovery and job creation".
Capital spending on infrastructure would rise by at least €500m, financed by spending cuts in other areas, Finance Minister Elena Salgado said yesterday.
The cuts included a €6.4bn reduction in public sector investment.
One priority for the extra spending will be the A8 motorway linking northern Spain to France and the rest of Europe.
The statement came as figures showed a surprise increase in activity in Spanish construction, amid a general recovery in the eurozone building industry.
Construction in Spain, which has suffered a collapse second only to Ireland's, jumped 7.2pc in June from the prior month, after a fall of 0.2pc.
Overall building activity in the euro region increased by 2.7pc from May, according to the European Union's statistics office.
In the three months to June, a 15.8pc surge in German construction drove a rebound in output across the euro region.
Output rose 2.9pc in the quarter after a 3.3pc decrease in the first three months, Eurostat said in yesterday's report.
The June increase saw output rise 3.1pc higher than the same month last year, compared with a 6.2pc decline in the 12 months to May.
Ms Salgado said the Spanish government's goal was to promote recovery and jobs, while maintaining the welfare state and meeting targets for reducing the budget deficit.
The country's deficit was the third-highest in the euro region last year, after Greece and Ireland, at 11.2pc of gross domestic product (GDP).
The government plans to reduce it to 6pc next year, after the toughest austerity measures in three decades, although the European Commission forecasts a shortfall of 8.8pc of GDP.
Ms Salgado said that Madrid had no plans to increase corporate taxes and any changes to personal tax rates would aim to increase equality rather than raise government revenue.
Prime Minister Jose Luis Rodriguez Zapatero said last week the government may have room to reverse some of the €6bn in planned cuts in infrastructure spending after interest rates government borrowing declined.
The extra yield investors demand to hold Spanish debt rather than German equivalents has fallen by almost a third since a euro membership record in June.
Compared with six months ago, the Spanish 'spread' over Germany has increased by 0.9pc. This is compared with 1.4pc for Ireland and 1.8pc for Portugal.
Yields on eurozone government debt fell across the board yesterday by around five basis points (0.05pc), although that meant there was no change in the spreads over the benchmark German bonds.