Splash out then watch the crash.

Regional government officials claim that the image of the Valencia region of Spain projected in foreign documentaries is unreal.

Read more: Splash out then watch the crash | In English | EL PAÍS

VAT rates increase in Spain.

As part of the austerity package needed to bring the Spanish economy and debt under control the government has increased the rates of VAT charged on goods and services with effect from the 1st September 2012.

Prior to this date Spain had three rates of VAT, 4%, 8% and 18% with the various category of goods and services subject to one of these rates.

Graphic by Laverdad.es http://www.laverdad.es/RC/201208/31/Media/iva1.jpg

From the 1st September the 8% rate has been increased by 2 points to 10% and the 18% rate has been increased by a greater amount to 21%. the lowest rate of 4% on essential goods has not been increased although some items charged at this rate have been reclassified to a higher rate group.

In the case of school supplies; textbooks, albums, sheet music, maps and sketchbooks, remain taxed at super reduced VAT of 4%; whilst pens, diaries, cards, craft pads, compasses, colored paper and plasticine and similar items are now classed as office supplies and are subject to a 17% increase in VAT to 21%.

There has also been a recatagorisation of items in the middle rate to the top rate, an increase from 8% to 21%. These include entry to theaters, cinemas, circuses and other shows and some services, such as hairdressing and funeral services. The same goes for some cosmetics and personal care products.

The increases in the rates are the greatest rise in VAT rates in the history of Spain and are viewed with suspicion by many sectors of the economy. The Consumers and Users Organization has estimated the increase for consumers at 470 euros per year.

The Prime Minister of Spain, Mariano Rajoy, has acknowledged that the VAT hike is a painfull measure and a sacrifice that all citizens have to make because it will help the government to finance public services. Having explained that his government has taken this action because it is an essential step to tackle the current crises and falling government revenues. He has been reported as saying "I realize that is a sacrifice that comes at a very difficult time," and "nobody has the slightest doubt" that his government would not have raised VAT if it had not been necessary. Rajoy has emphasised that the tax increases are "exceptional instruments" instigated to deal with an exceptional set of circumstances that should never happen again and that VAT will return to the previous situation when circumstances permit.

The Prime Minister gave his assurances that if Spain continues on this path it will begin to regain confidence as a country, showing that it is "serious and dutiful", enabling cheaper financing and attract investment to return rapidly to grow and create jobs.

It is very easy for him to offer this long term hypothesis as justification for the increases in VAT but it is the unemployed, the low income workers and the pensioners who will be those who suffer the most in the present time. They will suffer because of the failings of the monied elite.

How much closer will the state of the Spanish economy get to that of Greece? How much longer will it be before the citizens of Spain escalate their demonstrations against the policies of the rightwing Partido Popular government led by Mariano Rajoy?

http://www.europapress.es/economia/noticia-hoy-entra-vigor-subida-iva-20120901081120.html
http://www.laverdad.es/alicante/rc/20120901/economia/vivir-desde-manana-caro-201208310051.html
http://www.europapress.es/nacional/noticia-rajoy-reconoce-subida-iva-dolorosa-no-caera-saco-roto-20120901141901.html

Update: 28.09.2012
VAT increase causes inflation to jump to 3.5 percent in September.

The Spanish are poorer!

According to an article by El Pais the Spanish paper "It appears that the per capita income of Spaniards has gone on declining in 2010 in relation to its previous levels; but also, and even more worryingly, with respect to the European average. In 2010, according to the Eurostat data released on Tuesday, it stood eight points below the average of the 17 countries of the euro zone and exactly equal to the average of the 27 EU states".

Read the full article: The Spanish are poorer · ELPAÍS.com in English

Prime Minister Zapatero says Spain will take five years to correct imbalances

During his appearance in the Congress to report about the last EU summit, the Prime Minister, José Zapatero, has said that Spain will need five years to correct structural imbalances in the economy.

In his view, the task of correcting these imbalances will not be just for the government but it will be a joint effort which requires adopting a perspective that allows to join efforts and reach agreements. The future must see a series of reforms, efforts, productivity and covenants. He said "it should be a time of vision, scope, responsibility and ability to drive and commitment even though it is unpopular. And of course we are willing to do that".

Read more: Zapatero dice que España tardará cinco años en corregir los desequilibrios. europapress.es

Spanish unions call general strike over labour reforms

Spanish unions have called a general strike in response to labour market reforms due to be unveiled by the government on Wednesday.

The unions announced the strike would take place on 29 September, to coincide with a European "day of action".

Is this really going to help Spain at this time. The IMF report said that Spain needed a more flexible and competitive labour market.

Spanish unions call general strike over labour reforms

Spain's Credit Rating Reduced

BBC News - Fresh downgrade for Spanish debt

Guardian - Euro falls as Spain suffers rating downgrade

The International Monetary Fund has expressed fresh concerns about Spains ecomony,

The International Monetary Fund has expressed fresh concerns about Spains ecomony, saying that it (the ecomomy)  

"needs far-reaching and comprehensive reforms The challenges are severe: a dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness"

The IMF sees an outlook of a weak and fragile recovery which the policy agenda being based on rebalancing the economy and boosting confidence. The point is made that a radical overhaul of the labor market is urgently needed as it is not working with an excessively high umemployment figure.

The IMF notes that an ambitious fiscal consolidation is underway to reach the three percent of GDP deficit target by 2013. To achieve the 10 percent improvement of the GDP from 2009 to 2013, the Spanish government has taken a wide range of measures, including the fiscal package approved by the Cabinet last week. The IMF supports the package.

Spain faces strong spending pressures over the longer term due to aging and slower population growth, therefore bold pension reforms should also be implemented soon. The IMF notes that the government has outlined possible reforms, including raising the retirement age to 67.

It is reported that the banking sector is sound but remains under pressure, with a need to accelerate a programme of consolidation and reform to reduce overcapacity and produce more robust institutions.

The full IMF mission statement can be read here.