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Spain Approves More Health Cuts

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MADRID (AP) — Spain’s conservative government targeted its austerity program on the education and health care systems Friday with €10 billion ($13 billion) in spending cuts and increased fees as part of a drive to reduce its deficit.

The cuts will include a crackdown on so-called health tourism, in which foreigners from the EU and elsewhere come to Spain to use its universal health care system. In 2009 alone, abuse of the system cost the government €900 million ($1.2 billion), Health Minister Ana Mato said after a Cabinet meeting. Another measure was to stop immediate entitlement to health care for undocumented immigrants, which is expected to save the government €500 million.

Speaking on the eve of the meeting, Prime Minister Mariano Rajoy said the measures were necessary because state coffers were running dry.

“It’s necessary, imperative because at this moment there is no money to pay for public services,” said Rajoy, who was in Colombia for an official state visit.

“There’s no money because we have spent so much over the last few years. So we have to do this so that in the future we can get out of this situation,” he said.

The new measures also include hikes in what people covered by the state health system pay for medicines over the counter.

In education, the government approved increases in university fees, raised pupil-teacher ratios in schools and working hours for teachers, Education Minister Jose Ignacio Wert announced.

Spain’s regional governments mostly control education and health, but they are not likely to oppose the new measures as most are run by Rajoy’s ruling Popular Party. Labor unions, on the other hand, have announced protests for April 29.

The latest package is part of the government’s efforts since taking office in December to reassure the European Union and investors that it can handle its finances and reduce a deficit from 8.5%  in 2011 to 3%  next year.

The €10 billion package come on top of a €27 billion deficit-reduction package included in the 2012 budget unveiled last month. The government has also introduced labor market and financial reforms.

So far, however, the measures have failed to completely convince investors and Spain’s borrowing costs have begun to rise. On Friday, the yield for key 10-year bonds on the secondary market — an indicator of what the government would have to pay in debt auctions — was at 5.93%, making for a spread against the benchmark German bond of 4.26 percentage points.

A yield of 7% over the long term is considered unsustainable and could push Spain to follow Greece, Ireland and Portugal into asking for a bailout.



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