MARIANO RAJOY announced a round of tax cuts and new job creation incentives, along with increase in the country’s growth forecast in his annual state of the nation address yesterday.
The prime minister told parliament his conservative government now sees the economy expanding by 1.0% this year, up from the current 0.7% forecast, with growth picking up to 1.5% in 2015.
He said his tough economic reforms and austerity policies had helped move things along, and claims the country is now seen as a motor, rather than a burden, of Europe.
“The possibility of a rescue, of abandoning the euro, the lack of confidence, are words that no longer deserve a mention,” he said.
But he warned there was no scope for complacency, and unemployment is likely to remain high.
To reduce the unemployment rate, Rajoy said social security contributions on new hirings would immediately be cut to a flat fee of 100 euros a month during the first two years.
The government will also exempt workers earning less than 12,000 euros per year from paying income tax from 2015, when Spain is scheduled to hold its next general election.
“Now is the time to encourage the creation of stable employment with a new and significant reduction in social charges,” Rajoy said.
Income taxes will also be reduced for middle and lower incomes and new deductions for families will be created as part of an overhaul of the tax system that will affect 12 million people, Rajoy said.
“Now that the sacrifices Spanish society has made are bearing fruit, the time has come to soften the demands that were forced upon us by necessity,” he said.
Rajoy’s new forecast for 2014 economic growth was in line with a fresh outlook on Spain’s economy delivered Tuesday by the European Commission.
Brussels lifted its economic growth forecast for Spain for 2014 to 1.0 percent from 0.5 percent previously and predicted growth of 1.7% in 2015.