Spanish Business News

Spain will spend at least 500 million euros ($643 million) more than initially planned on infrastructure next year and won’t increase taxes to finance deficit-cutting efforts, Finance Minister Elena Salgado said.

The additional spending on public works won’t increase overall spending as the funds will be raised by cutting outlays in other areas, she said.

The government’s goal is “to facilitate the economic recovery and job creation while maintaining our welfare state,” Salgado said at a press conference in Madrid today. “We are confident about meeting our macroeconomic” targets.

Prime Minister Jose Luis Rodriguez Zapatero said last week the government may have room to reverse some of the 6 billion euros in cuts planned for infrastructure spending after the country’s borrowing costs declined. The extra yield investors demand to hold Spanish debt rather than German equivalents has fallen by almost a third since a euro-era high in June.

To bring down borrowing costs, the government has enacted the deepest austerity measures in at least three decades, including a reduction in public wages and a cut in investment in new infrastructure.

Spain has no plans to increase corporate taxes and any changes to personal tax rates will aim to increase equality rather than raising government revenue, Salgado said.

The country’s deficit was the third-highest in the euro region last year at 11.2 percent of gross domestic product and the government plans to reduce it to 6 percent next year. The European Commission forecasts a shortfall of 8.8 percent for 2011.

Source: Bloomberg