Euro Zone Crisis 2012: Spain Needs Shared Sacrifice When Implementing Austerity Measures


Since Mariano Rajoy came to power in Spain, there have been many austerity measures taken to supposedly solve the current fiscal crisis. The last one was taken a couple of days ago, aiming to cut €65 billion ($97.5 billion) in public spending and raise taxes up to 21% (all of this while miners were still protesting on the streets of Madrid). And, while Rajoy has lost popularity as a result, are these austerity measures what Spain really needs? Yes, they are. 

Spanish laws and system have too many flaws, which cost millions of euros every year while preventing the economy to grow. Even though these flaws have been there for decades, the Spanish are now paying the price for them. One of the biggest problems Spain is facing, in order to save money, is the huge amount of people working for the government (mayors, city councils and other high status positions) and their huge salaries. There is one city hall in almost every (if not in each) town in Spain, independent of the number of inhabitants. This requires a massive amount of public money, with little or no actual benefit for citizens. Although the amount is clearly way too much for what they actually do, this all has a reason dating back to Franco's dictatorship, where mayors volunteered and did not get paid. This helped the Spanish people a great deal back then, but now it's more of an economic burden.

Another flaw in the Spanish system is the life annuity every former minister and ex-president is entitled to after leaving his or her post. A Spanish worker has an average retirement pension of less than €12,000 ($18,000) a year. This all depends, though, on how many years one has worked and what was one's job status; but we should take into account that, the minimum wage in Spain is around €600 ($900) and most people do not earn €1,000 ($1,500) which leaves them with a pension below €1,000 ($1,500) per month.

On the other hand, ministers and presidents, don't have to necessarily work many years to get a pension of €75,000 ($112,500) a year. It is enough if they just work for seven years or less as a minister or four years as a president. This guarantees a lifetime salary for every person that was ever in charge of a ministry (or the country), even if it was only for a few months (Zapatero changed his cabinet  so many times when he was in charge that he must be very popular among all his ministers).

These, among other similar flaws of high expenditure and little production, are what's preventing economic growth in Spain. Even though austerity might seem as a harsh, and not always necessary measure, nothing else makes a bank account positive than some income. Spain has been using, and still does, more money than the country actually has and is able to produce. The only two solutions for this to stop are to produce more or to spend less. Because the first one is not likely to happen, due to cultural reasons, Spain is only left with the second choice. 

Although it may seem as though I approve of Rajoy's measures, and I understand the logic behind them, I actually do not completely agree with them. What, in my opinion, should be done (sticking to the austerity fashion) is reducing the government to a useful minimum. The government is necessary, but it should not be a load to carry by the Spanish as it is now.

Life annuity should disappear, not only because it is a waste of money but because it is absurd and unfair for the rest of the Spanish workers. Also, instead of cutting mostly on civil servants' salaries, they should also cut on elected officials' (which is something hard to do, but extremely necessary).

There should be a balance between austerity and spending. Austerity should be applied globally, but leaving people with enough confidence to spend little by little and allow the economy to move back on track once again. Extreme cuts on salaries and high taxes, will only prevent people from spending -- which might work for a while. But once the economy stabilizes, the confidence should be restored. The bottom line: the Spanish government should learn how to spend public money more wisely.