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Spain pushes sales tax to 21% in EU crisis


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#1 key2thecup

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Posted 11 July 2012 - 06:12 PM

Spain Deepens Austerity Under European Pressure

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Prime Minister Mariano Rajoy announced a swathe of new taxes and spending cuts on Wednesday designed to slash 65 billion euros from the budget deficit by 2014 as recession-plagued Spain struggles to meet tough targets agreed with Europe.

Rajoy, of the center-right People's Party, proposed a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent, and outlined cuts in unemployment benefit and civil service pay and perks in a parliamentary speech interrupted by jeers and boos from the opposition.
"These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros," Rajoy told parliament.
He also announced new indirect taxes on energy, plans to privatize ports, airports and rail assets, and a reversal of property tax breaks that his party had restored last December.
However, he did not touch pensions — keeping one election promise — and said the tax burden was being shifted from direct taxes on labor and income to taxation on consumption.
Outside in the streets of Madrid, hundreds of coal miners who had staged a march from northern Spain protested against cuts in mining subsidies they say will put them out of work, as public discontent over austerity measures grows.
With five years of economic stagnation and recession, unemployment at 24.4 percent and tax revenue falling, Spain is struggling to meet tough deficit cutting targets agreed with the European Union.

The high deficit and weak banks, which will receive up to 100 billion euros in European aid, are now at the center of the euro zone's debt crisis as investors fret that Spain could join Greece, Portugal and Ireland in needing a sovereign bailout.
Madrid's borrowing costs have soared in recent months, with the yield on the 10-year government bond breaching the 7 percent level regarded as unsustainable in the long run. On Wednesday, that yield fell to 6.81 percent.
The EU agreed on Tuesday to give Spain more time, until 2014 instead of 2013, to bring the public deficit down to 3 percent of gross domestic product and relaxed this year's goal to 6.3 percent. However, a European Commission document said even that easier target would be difficult to reach.
With the latest measures, Rajoy completely overhauled his previous budget plan, in which the central government and 17 autonomous regions had put in place some 48 billion euros in savings for 2012, insufficient to bring the deficit into line.
It was not immediately clear exactly how much of the 65 billion euros headline figure was new savings.
Rajoy announced reforms to city hall governments, shutdowns of public companies, reduced benefits for civil servants, budget cuts for political parties and labor unions.
The prime minister, who had pledged in his election campaign last year not to raise VAT, said he now had no choice. The main rate will rise to 21 from 18 percent and the reduced rate to 10 from 8 percent in a move that could further depress consumer spending.
"We are living in a crucial moment that will determine the future of our families, our youth, our social welfare and all our hopes," he said. "That is the reality. We have to get out of this mess and we have to do it as soon as possible."

Miners Protest

As Rajoy announced the new austerity measures, hundreds of coal miners marched through the center of Madrid to protest against a previous 60 percent cut in coal subsidies that they say will shut down mines and put them out of work.
The miners, who had walked some 400 km (250 miles) from the Asturias region over 44 days, were joined by thousands of supporters, including labor activists, on Wednesday after receiving a hero's welcome in the capital on Tuesday night as they marched in with lamps lit on their helmets.
Public anger over spending cuts has risen as school and hospital budgets have been hit.
"Without the mines we don't have anything, absolutely nothing in our region," said one of the miners in the protest, Albano Gonsalvez.
With nearly one quarter of the workforce and more than half of young Spaniards without a job, the government said unemployment benefit would fall to 50 percent of previous earnings from 60 percent after the first six months on the dole.
Rajoy said the measure was intended to increase the incentive to look for work.

http://www.cnbc.com/id/48144383


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Edited by key2thecup, 11 July 2012 - 06:12 PM.

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#2 Armada

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Posted 11 July 2012 - 06:19 PM

The EU's not gonna last for very long.

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#3 ronthecivil

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Posted 11 July 2012 - 06:22 PM

We should do the same here. Up GST by one point and keep up the program of cuts to the federal budget.

Get the painful choices out of the way before they bite us even harder in the future. There's no reason to be aiming for eliminating the federal deficit in three years when we could be in surplus next year.

#4 ronthecivil

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Posted 11 July 2012 - 06:27 PM

The EU's not gonna last for very long.


If energy prices tank (not an unreasonable situation what with world economies tanking) and our housing market drops (also very possible) then our own indebted population (at the federal, provincial, and personal level) which is at record level of debt to income levels could see a large drop in revenues resulting in a very VERY similar situation here.

Canadians have no reason to be smug!

#5 Armada

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Posted 12 July 2012 - 12:15 AM

If energy prices tank (not an unreasonable situation what with world economies tanking) and our housing market drops (also very possible) then our own indebted population (at the federal, provincial, and personal level) which is at record level of debt to income levels could see a large drop in revenues resulting in a very VERY similar situation here.

Canadians have no reason to be smug!


I'm not trying to be smug.

It just seems inevitable. I would say a majority of the countries in the EU are struggling, some notably a lot more than others.

Edited by Armada, 12 July 2012 - 12:15 AM.

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#6 Mr. Ambien

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Posted 12 July 2012 - 01:56 AM

If energy prices tank (not an unreasonable situation what with world economies tanking) and our housing market drops (also very possible) then our own indebted population (at the federal, provincial, and personal level) which is at record level of debt to income levels could see a large drop in revenues resulting in a very VERY similar situation here.

Canadians have no reason to be smug!

Indeed.

#7 Columbo

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Posted 12 July 2012 - 03:39 AM

We should do the same here. Up GST by one point and keep up the program of cuts to the federal budget.

Get the painful choices out of the way before they bite us even harder in the future. There's no reason to be aiming for eliminating the federal deficit in three years when we could be in surplus next year.


Raise taxes a bit, sure, I could be in favour of that. But above 20% like in Spain (and much of Europe) is just too much. It hurts the middle class too much, they have less expendable money, and as consumer spending falls, jobs and the economy go with it.

#8 ronthecivil

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Posted 12 July 2012 - 01:49 PM

I'm not trying to be smug.

It just seems inevitable. I would say a majority of the countries in the EU are struggling, some notably a lot more than others.


Wasn't saying you in particular it's that Canadians think themselves better and more conservative and thus think there's nothing to worry about.......

#9 ronthecivil

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Posted 12 July 2012 - 01:52 PM

Raise taxes a bit, sure, I could be in favour of that. But above 20% like in Spain (and much of Europe) is just too much. It hurts the middle class too much, they have less expendable money, and as consumer spending falls, jobs and the economy go with it.


Which is why we should make the required changes now before the changes become brutally painful.

Keep in mind that in addition to the credit bubble we also have a demographic crisis on our hands.... soon we will have a significant drop in taxpayers combined with a significant increase in tax consumers as the baby boomers begin to retire on mass.

#10 Drybone

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Posted 12 July 2012 - 02:36 PM

I have no idea why Spain is doing this when all it does is prolong the agony. I guess they are waiting to see what happens in the election .
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#11 ronthecivil

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Posted 12 July 2012 - 02:58 PM

I have no idea why Spain is doing this when all it does is prolong the agony. I guess they are waiting to see what happens in the election .


They need to get their fiscal house in order since people aren't willing to lend them money anymore. Already they have to sell bonds at like 8% interest rates! They are getting close to being a country that could by analogy be looked at as a family getting by on credit card debt. If they don't fix their debt problems (in or out of the euro) they will suddenly find themselves in a situation where nobody will lend them money and they get to pretend to be like North Korea (the starving not nuclear variety) for a while isolated in the world.

That give you a pretty good idea?

#12 key2thecup

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Posted 12 July 2012 - 03:49 PM

I have no idea why Spain is doing this when all it does is prolong the agony.


'Cause the EU said so.

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#13 Drybone

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Posted 12 July 2012 - 05:58 PM

'Cause the EU said so.


lol. And how long does that last until the economy suffers due to the tax increase. Its a swirling toilet bowl.

I give it 6 to 12 months.
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#14 key2thecup

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Posted 12 July 2012 - 06:05 PM

lol. And how long does that last until the economy suffers due to the tax increase. Its a swirling toilet bowl.

I give it 6 to 12 months.


No I agree, EU is full of unelected technocrats. Member states have lost local control of there own economies.

Laws are now written and passed by the EU bureaucrats. (unelected)

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#15 Kamero89

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Posted 12 July 2012 - 07:16 PM

ugh, are you just going to tax people to the point where they can't afford anything? In desperate economic times you can't go after the middle and lower classes, there is just not enough money there to tax to fix your problem.

#16 DIBdaQUIB

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Posted 12 July 2012 - 08:20 PM

ugh, are you just going to tax people to the point where they can't afford anything? In desperate economic times you can't go after the middle and lower classes, there is just not enough money there to tax to fix your problem.


Canada may not be far behind Europe. Our cost of government is not sustainable yet Canadians keep demanding more services, guaranteed benefits etc. All levels of government(Municipal, Provinical and Federal) are running deficits to maintain the standards Canadians demand but they are only kicking the can down the road to the next generation. Canadians are no different than Europeans when it comes to not wanting to make the sacrifices in order to avoid what much of Europe is experiencing.

#17 DefCon1

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Posted 12 July 2012 - 09:03 PM

We should do the same here. Up GST by one point and keep up the program of cuts to the federal budget.

Get the painful choices out of the way before they bite us even harder in the future. There's no reason to be aiming for eliminating the federal deficit in three years when we could be in surplus next year.


Raise taxes for what?? So Stephen Harper could spend more of it on military or buy new shoes?? As long as that idiot is in the office, we will be suffering and it wouldn't even matter if the taxes was raised. He is following the same footprint as our brothers in the south and Canada will be doomed. The best thing would be to get that idiot out of here and elect someone else who doesn't waste our tax money. You can't just keep taxing people while at the same time cutting services when the priority is all screwed up.

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#18 ronthecivil

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Posted 12 July 2012 - 10:18 PM

Raise taxes for what?? So Stephen Harper could spend more of it on military or buy new shoes?? As long as that idiot is in the office, we will be suffering and it wouldn't even matter if the taxes was raised. He is following the same footprint as our brothers in the south and Canada will be doomed. The best thing would be to get that idiot out of here and elect someone else who doesn't waste our tax money. You can't just keep taxing people while at the same time cutting services when the priority is all screwed up.


Well whether or not the money is spent on jets or handouts it doesn't matter it's the total amount of money being spent that's the problem. As for Harper I would just as soon axe the fighter jet fiasco and go with something cheaper. The boats are needed and are a good boost to local industry so while expensive it's not too bad.

But you got the Canadian attitude to a tee. You see, you not only CAN keep taxing people while cutting services, we pretty much have to. If we don't, the decision will be made for us, like it is for spain. For you see, in order to borrow money, you need someone willing to lend it to you. As soon as they decide they don't want to anymore, you will find that they will want to call the shots or they will simply cut you off and let you starve.

Right around then you might be happy you have a military! At least then it disuades them from coming to try and repossess!

#19 ronthecivil

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Posted 12 July 2012 - 10:20 PM

ugh, are you just going to tax people to the point where they can't afford anything? In desperate economic times you can't go after the middle and lower classes, there is just not enough money there to tax to fix your problem.


When you are broke and need borrowed money just to keep day to day operations going it's up to whoever is lending you the money how you go about fixing the problem. It's either that or they simply let you starve.

It's not a matter of ethics!

#20 Spoosh

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Posted 13 July 2012 - 02:59 AM

The way this is going, all Euro -countries and pretty much all the others as well will find themselves in a similar situation. The Euro -countries will keep pushing that method and lending the weaker money and forgiving national debts and in exchange of course the countries themselves have to make hard descisions like that and raise taxes and so on like mentioned in the OP. All this will continue until all countries are pretty much in the same situation. The big ones, France, Germany nor the smaller like Finland can't keep supporting for long as they face the same problems, just at a slower pace. Dunno about Canada, but it can't be all bed of roses there either as this and what has been done for so long in the US affects everyone else too.

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#21 Spoosh

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Posted 13 July 2012 - 03:06 AM

In a nutshell, all this could have been prevented (euro crisis) if none of these tax evasion countries had been left outside. If you'd thought of how much they had hustled and created bull to get membership in the first place, lots could have been saved and prevented. How many Italians, Greeks or Spaniards pay their taxes from street market sales with fake clothes, perfumes, food or alcohol? And how much money is that? For example; in Finland, pretty much everything taxed and on paper. So everything can be checked and the correct numbers can be verified. That can't be said of the countries that are struggling the most. That enables descisions makers to make the right choices at the time countries are chosen for membership.

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#22 theminister

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Posted 13 July 2012 - 07:39 AM

Well whether or not the money is spent on jets or handouts it doesn't matter it's the total amount of money being spent that's the problem. As for Harper I would just as soon axe the fighter jet fiasco and go with something cheaper. The boats are needed and are a good boost to local industry so while expensive it's not too bad.

But you got the Canadian attitude to a tee. You see, you not only CAN keep taxing people while cutting services, we pretty much have to. If we don't, the decision will be made for us, like it is for spain. For you see, in order to borrow money, you need someone willing to lend it to you. As soon as they decide they don't want to anymore, you will find that they will want to call the shots or they will simply cut you off and let you starve.

Right around then you might be happy you have a military! At least then it disuades them from coming to try and repossess!


Sorry? Why do we need to borrow money? We didn't from 1934-1973 and did very well creating our own.

Currently, we spend about $40B servicing that debt load annually. What exactly are we getting for that money that we can't do for ourselves?


Edited by theminister, 13 July 2012 - 07:41 AM.

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#23 hockeyfan87

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Posted 13 July 2012 - 07:44 AM

All I know is with the state of the Euro I could go and live like a king in Scotland and find a nice girl with an accent. Sounds pretty appealing to me.

#24 Drybone

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Posted 13 July 2012 - 07:53 AM

All I know is with the state of the Euro I could go and live like a king in Scotland and find a nice girl with an accent. Sounds pretty appealing to me.


Sounds good to me too !!!

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#25 D-Money

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Posted 13 July 2012 - 12:13 PM

I think I know how they may fix this in one fell swoop: remove the "charitable organization" label from religious organizations, and apply a retroactive tax on their donations.

The money collected from the Catholic Church alone would be astronomical.

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#26 D-Money

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Posted 13 July 2012 - 12:14 PM

All I know is with the state of the Euro I could go and live like a king in Scotland and find a nice girl with an accent. Sounds pretty appealing to me.


Sorry, but the U.K. never adopted the Euro as their official currency.

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#27 key2thecup

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Posted 13 July 2012 - 11:22 PM



Edited by key2thecup, 13 July 2012 - 11:29 PM.

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#28 ronthecivil

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Posted 14 July 2012 - 01:17 PM

Sorry? Why do we need to borrow money? We didn't from 1934-1973 and did very well creating our own.

Currently, we spend about $40B servicing that debt load annually. What exactly are we getting for that money that we can't do for ourselves?


We don't NEED to borrow money. Not yet anyways.

That's the path were going down though.

#29 ronthecivil

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Posted 14 July 2012 - 01:19 PM

I think I know how they may fix this in one fell swoop: remove the "charitable organization" label from religious organizations, and apply a retroactive tax on their donations.

The money collected from the Catholic Church alone would be astronomical.


While I certainly wouldn't mind taxing the church I can't help but think that would go over like a lead baloon.

#30 Drybone

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Posted 14 July 2012 - 03:17 PM

While I certainly wouldn't mind taxing the church I can't help but think that would go over like a lead baloon.


I appreciate where you are coming from but we dont really have the royal right to just keep taxing peoples hard earned money and distribute it wherever we see fit.

The countries wealth does not belong to everyone equally . Its privately owned individually.
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