The Economy Takes Another Hit...No a Blow to the Head!

Last night at dinner, I was watching the news with my host family. As usual, some government and politics stuff came on, and my host mom continued to say how terrible the economy is here. However, last night she was making a bigger deal out of the economic crisis than normal. I didn't quite understand why until I had class this morning. During the last few minutes of my culture class, our teacher informed us that yesterday the Prime Minister of Spain announced major budget cuts and tax hicks that will be in effect starting on Monday. Once I saw the outrageous numbers, my heart skipped a beat...

'This is reality': Spain slashes spending, raises taxes in $79B austerity plan

MADRID -- Spain announced a 65 billion euro ($79.85 billion) austerity package that includes tax hikes and spending cuts on Wednesday, a day after it won approval from its euro partners for a huge bailout of the country's stricken banks.

Prime Minister Mariano Rajoy told parliament the country's future was at stake as Spain grapples with recession, a bloated deficit and investor wariness of its sovereign debt. He said the nearly $80 billion in savings will be achieved through 2015 by a hike in sales taxes and a series of spending cuts through 2015.

"We are living in a crucial moment which will determine our future and that of our families, that of our youth, of our welfare state," Rajoy said.

Spain's unemployment rate is more than 24 percent overall and 50 percent for young people. 

"What motivates us is the five million people out of work," the BBC News quoted Rajoy as saying.

Wednesday's increases in sales tax include a hike to 21 percent on products and services like clothing, cars, cigarettes and telephone services to 21 percent, and increase to 10 percent on goods such as public transport fares, processed foods and bar and hotel services. The sales tax on basic goods like bread, medicine and books stays at four percent.

The increases were widely expected but go against campaign pledges Rajoy made before he was elected in November and since he came to power.

Other measures outlined Wednesday included:

• further cuts in government spending beyond the reductions already outlined in the 2012 budget
• wage cuts for civil servants and members of the national parliament
• further closures of state-owned companies
• tax deductions for homeowners to be scrapped
• a 30 percent cut in the number of town councilors
• changes to unemployment benefits designed to encourage jobless people to seek work quickly.
• 20 percent cut in government subsidies to political parties and labor unions.

To read more http://worldnews.msnbc.msn.com/_news/2012/07/11/12677091-this-is-reality-spain-slashes-spending-raises-taxes-in-79b-austerity-plan?lite

The teacher also informed us that due to the tax increase, employee salaries will decrease by a lot. Her sister's salary is expected to decrease by 50%!!!!! Wow, I don't want to hear anymore about how bad the economic crisis is in the United States. Be thankful you have a job, a decent salary, and not as much taxes to pay. The situation is already bad enough here, and I can't imagine how people are going to be able to afford this huge tax increase.