Spain’s 2013 Austerity Budget Guaranteed to Make Things Worse (Video)

Austerity doesn’t work, as any economist worth his salt will tell you. So, to see Spain’s government of Mariano Rajoy announce yet more cuts (over $52 billion worth) in their just-released 2013 austerity budget shows just how stupid they are.

In the 2013 Spanish budget, Rajoy’s government will be cutting a further 8.9 percent of spending across all government ministries, taxing lottery winners 20 percent, and taking away tax breaks for mortgages on the family home. As Spaniards have already been hit with a massive increase in sales tax this year, these additional cuts that will affect the average Spanish family’s budget quite markedly are not going to go down well.

Good news in the 2013 austerity budget for Spain, however, is that civil servants will be getting their Christmas bonus back (that was eliminated last year by Rajoy’s government), and the tax on capital gains of less than a year is also being increased.

But, as Trevor Greetham, director of Asset Allocation at Fidelity Worldwide Investment, says fiscal austerity is the wrong path to solve Europe’s debt crisis. In The Guardian today Greetham said:

I’ve always opposed austerity as the solution to the global debt crisis and the strictures of the common currency make it particularly ill-suited to the euro periphery. Efforts to deflate Spain into competitiveness raise the prospect of many years of wage cuts and property price falls that will necessitate ever larger fiscal transfers from the stronger countries, either directly or via pan-euro institutions like the central bank.

He then goes on to talk about how, as Spain continues its failing austerity programs, the UK and the US continue to practice either minor austerity but “loose money” (in the case of the UK) or no austerity and “loose money” (in the case of the US).

While this is going on, Spain continues to see a failing economy, while the economies of the UK and the US are slowly improving.

It doesn’t take a rocket scientist to prove that austerity measures don’t work. Just someone who understands the simple factors that contribute to getting an economy moving again. Something Spanish prime minister Mariano Rajoy obviously doesn’t understand at all.

Meanwhile, Spain’s 2013 state austerity budget will be sent to Congress on Saturday for approval by October 1. We can only expect even more protests across Spain when it does.