Spain passes health, education reforms to cut costs

Spain's government laid out health and education reforms on Friday aimed at slicing 10 billion euros a year off public spending as Prime Minister Mariano Rajoy fights to reassure investors about the country's fiscal stability. Spain's 17 autonomous regions need to find savings of 7 billion euros a year from their healthcare budgets, and cut a further 3 billion euros from education costs as part of the government's drive to reduce the public deficit and calm rising euro zone crisis fears.
The measures could trigger a backlash from some regional leaders but are likely to be passed into law without difficulties as the ruling People's Party, or PP, has an absolute majority in the national parliament. "These are difficult measures for difficult times," Deputy Prime Minister Soraya Saenz de Santamaria said at a news conference announcing the measures.
The 11 regions governed by the PP have signed up to the reforms. Regions governed by the opposition have not formally signed off on the measures. Catalonia, the biggest region where the PP does not govern and that makes up close to a fifth of the country's economic output, has already proposed health cuts in its budget so is not seen opposing the central government's new rules.
The southern and most populous region of Andalucia, which remains under Socialist control, has spoken out against healthcare reforms, but given it will rely on Madrid for financing this year to pay providers may have little voice in opposing savings. Under the reforms, the regions, which account for around 50 percent of public spending, will be able to increase university fees, teachers' working hours, and classroom sizes by 20 percent as part of cuts to education spending. University students will end up paying a maximum of 25 percent of their study costs, up from 15 percent at present. Assuring the regions make the cuts will be essential in helping to lower the country's borrowing costs because it is key for investor confidence.
On Friday the cost of financing Spanish ten-year debt was just shy of 6 percent, approaching levels where analysts see a growing risk of borrowing costs spiralling out of control. The regions have been set a budget deficit target this year of 1.5 percent of national gross domestic product, meaning they will need to cut costs by around 15 billion euros, much of which is supposed to come from the reforms announced on Friday.
Regional budgets are due to be approved by the central government by the beginning of May. Earlier this week a high level government source said that if the plans were not up to scratch then it would 'intervene' as soon as next month and work with the regional authorities to come up with more credible plans. The government has so far rejected draft budgets from Catalonia and Andalucia, which together make up around 30 percent of economic output.