Spain’s 2017 Draft Budget Is the First in Nine Years Without Austerity Measures

Spain’s government has published its long-delayed draft budget for 2017 which boosts social spending and moves away from austerity in a bid to win opposition support for the spending plans.

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Finance Minister Cristobal Montoro said the budget would “fuel growth and employment” while at the same time allowing Spain to meet the deficit targets agreed with the European Union.

The spending plan slashes the IVA tax controversially slapped a few years ago on live shows such as concerts and theatre performances from 21 percent to 10 percent and boosts funding for programmes to aid youths and the unemployed.

It is the first budget without major cutbacks since Spain was plunged into an economic crisis in 2008 when a decade-long property boom finally turned to bust, throwing millions of people out of work and causing its public debt to soar. The 2017 budget was put on hold after two inconclusive elections left the country without a functioning government for nearly a year.

It is based on a prediction that the Spanish economy, the euro zone’s fourth largest, will expand by two and a half percent in 2017 while the unemployment rate will drop to 16.6 percent from 18.6 percent last year, which will reduce spending on unemployment benefits and increase tax revenues.

Parliament is expected to vote on the draft budget at the end of May. The budget vote will be a key test for Prime Minister Mariano Rajoy’s Partido Popular minority government as it well need the support or at least abstentions from other parties for the budget to be passed into law.