Austerity Europe: where the axe falls
Updated on 08 June 2010
As Spanish public sector workers strike against austerity measures, Channel 4 News examines the extent of the cuts being made across Europe as it struggles to recover from the fiscal crisis.
An estimated 2.3 million public sector workers went on strike in Spain today in protest against government plans to cut the deficit and pull the country out of recession.
Spain is the latest country to usher in austerity measures which are currently sweeping across Europe as governments are forced to trim huge budget deficits.
Europe faces debt and tightens belts
UK
Earlier this week Prime Minister David Cameron laid out plans to introduce "painful" measures to cut Britain's record budget deficit. The coalition has already announced over £6bn of savings affecting departments such as transport and business.
But in order for the government to cut the deficit of £156bn - which is above 11 per cent of GDP - many more austerity measures are set to come.
An emergency budget is set to be published latest this month with welfare and public sector pay expected to be on the list of cuts.
The Treasury is expected to consult the public on which programmes should be protected, and which government functions could be left to the voluntary sector.
Greece
The country's debt crisis, and subsequent strikes, had threatened to spread across the Eurozone.
Greece has approved a pension reform bill, after agreeing with the EU and International Monetary Fund a fresh set of austerity measures. Under the deal, Greece plans to narrow its budget shortfall from 13.6 per cent of GDP in 2009 to 8.1 per cent this year.
Austerity measures include a public sector pay freeze until 2014 with some holiday abolished for certain civil servants earning a certain amount.
Public sector allowances are cut by an additional 8 per cent. These allowances, which account for a significant part of civil servants' overall income, were cut by 12 per cent under a round of austerity measures announced in March.
Germany
The economic powerhouse of Germany is planning to cut the budget deficit by 80bn euros (£65bn), or three per cent of GDP by 2014.
With a legal obligation to eliminate the deficit by 2016 Chancellor Angela Merkel said Germany had "an outstanding chance to set a good example."
Austerity plans include a cut in subsidies to parents, government job cuts and higher taxes on nuclear power. A hike in food on VAT to 19 per cent is also a possibility along with a possible end to military conscription.
Spain
The government has announced fresh spending cuts totalling 15bn euros in 2010 and 2011. Civil service salaries will be cut by five per cent in 2010 and frozen in 2011, while more than 6bn euros will be cut from public investment.
The cuts are aimed at speeding up fiscal consolidation and meet Spain's revised deficit targets of 9.3 per cent of GDP in 2010 and 6 per cent in 2011, compared with 11.2 percent in 2009.
Republic of Ireland
The government's budget for 2010 presented in December projected a deficit of 11.6 per cent of GDP.
Three austerity packages have been presented in little over a year with the first two budget focussing on tax rises. December's budget for 2010 drew most praise as it delivered spending cuts of 4bn euros, including a cut in public sector pay by at least 5 per cent.
The measures include cuts of 760m euros in social welfare and 960m euros in investment projects. Child benefit is being cut by 16 euros per month and a carbon tax has been bought in, set at 15 euros per tonne of Co2.
Fresh savings worth 3bn euros are planned for each of 2011 and 2012.
Italy
Although Italy kept its budget deficit down to 5.3 per cent of GDP last year the government aims to slash it to 2.7 per cent by 2012.
A cabinet meeting approved a 24bn euro deficit cut and measures such as delaying retirement dates, a state salary freeze and cuts to the pay of high public sector earners.
It is believed regional and local governments will be urged to contribute some 13bn euros of spending cuts in 2011-2012, which could affect schools and hospitals.
France
In 2009 France has a deficit of over seven per cent as a per cent of GDP and President Nicolas Sarkozy has vowed to restore its public finances as the economic recovery takes root.
In an effort to keep a lid on the budget deficit, France has said it will freeze all spending, except pensions and interest payments on government debt, between 2011-2013 and cut state operating costs by 10 per cent over the same period.
Portugal
The government has said a range of austerity measures will cut the deficit to 7.3 per cent this year and 4.6 per cent in 2011. In 2009 it hit 9.4 percent, prompting a sell-off of Portuguese assets by investors.
Five per cent pay cuts for senior public sector staff and politicians and increases in VAT sales tax, income tax and profits tax are all expected.
The main VAT rate will rise by one per cent and the government will and there will be income tax hikes for top earners. The government expects to generate additional revenues through a one-off tax on highly profitable companies, as well as new gambling and gaming licences and more property taxes.
Pensions will be frozen in 2010, 2011 and 2012 and by 2013 military spending will have been cut by 40 per cent.
