Spain sells public assets to aid debt
Spain is to sell a 30% stake in its national lottery and partially privatise airports in Madrid and Barcelona to ease market worries about public finances.
Prime Minister Jose Luis Rodriguez Zapatero made the announcements in parliament today after the country suffered at the hands of investors who fear it may need a bailout like those received by Greece and Ireland.
The government will also stop paying €420 per month in February to people whose unemployment benefits have expired.
The government hopes the move will convince investors Spain is taking strong steps to stabilise the eurozone’s fourth largest economy so it will not need outside help.
Madrid’s stock index, which had lost nearly 15% in November, jumped 4.5% by early afternoon on the news.
Pressure also eased on Spain’s 10-year bonds, with yields at 5.3%, making for a 2.5% difference against the benchmark German 10-year bond.
European Union Competition Commissioner Joaquin Almunia also welcomed the reforms.
“Very positive, they are extremely welcome. They are necessary, show the government’s determination and they are in the right direction,” he said.
“We have to hope that they will also help to strengthen market confidence in the evolution of the Spanish economy and Spain’s public finances,” he added.
Mr Zapatero said the measures will allow private investors a 49% stake in Spanish airports. The government hopes to raise €9bn from the operation.
Management of Madrid’s Barajas and Barcelona’s El Prat airports will be leased out.
Around 40,000 small and medium-size companies are expected to benefit from the tax cut. The measures also include a reduction in costs and red tape for people wishing to set up new companies.
The special unemployment subsidy will expire in February. The measure was introduced in 2009 as the crisis began to bite hard.
In less than three years, Spain has tumbled from being Europe’s top job creator to having a eurozone high unemployment rate of nearly 20%, with just under five million people out of work.
Spain is now struggling to emerge from nearly two years of recession triggered buy a collapse in its real estate sector during the international financial crisis.
Its chief task is to slash a swollen deficit from 11.2% of GDP in 2009 to within the EU limit of 3% by 2013.
Mr Zapatero, whose Socialist party is trailing badly in opinion polls, approved a package of belt-tightening measures in May that included wage cuts for civil servants, a freeze on most retirement pensions, and labour market reforms that make it easier and cheaper for companies to lay people off.