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Like many of the other European governments, Spain’s new Partido Popular is adopting a hard-line stance towards the country’s economy. Since officially taking power a week before Christmas, the new government has already vowed to cut down on tax evasion and trim the public sector.

This new 15€ billion package involves a range of cuts and tax increases and is likely to prove unpopular, but Prime Minister Mariano Rajoy and his team insist that these severe measures are essential.

Personal and corporate tax returns will be closely scrutinised and tax inspectors will be given the task of visiting workplaces in order to check that all employees are being paid correctly via the payroll. It is also thought that the government will set a limit for payments in cash, thereby restricting the opportunity for money laundering.

Spokeswoman Soraya Saenz de Santamaria estimated that the anti-tax fraud would raise nearly 8.2€ billion of extra revenue in 2012 and added that the three levels of government – central, regional and local – will be expected to eliminate a large number of the approximately 4,000 companies, agencies and other organisations that they own. The previous PSOE has already targeted this financially demanding problem, vowing in 2010 to eliminate 515 but only managed to dissolve 69.

With high unemployment figures and a private sector wallowing in debt, one of the biggest challenges for the new administration is to set a strict limit on its borrowing.

Luis de Guindos, the new Minister of the Economy, stated that banks would be expected to provide 50€ billion to strengthen the country’s balance sheets, severely compromised by the crisis in the housing market. Already banks have been forced to set aside billions to bolster failed mortgages, so this latest plan will prove problematic for some.

In an attempt to restrict the autonomy of Spain’s 17 regional governments the PP has also announced that an act to be passed in March will require all spending plans to be approved by the central government before implementation.

Information courtesy of Perez Legal Group

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