Spain is planning to increase the IVA/VAT rate by July of this year. The increase is as follows: The 4% rate which includes "basic needs" will be kept at 4%, the 7% rate which includes a wider variety of goods and services such as contact lenses, funeral services and restaurants, will be raised to 8%, and the "general rate" which is now 16% and includes all other products such as tobacco, and alcoholic drinks, will be raised to 18%. This plan to raise the VAT rates has upset the Partido Popular (Peoples Party). The party is demanding that congress debate the effects that this increase will have on the economy before it goes into effect in July. The European Commission has said that this increase could be a threat to Spain exiting the recession. Soraya Sáenz de Santamaría, who is the spokesman in congress for the Partido Popular, has recently met with her socialist counterpart from the government José Antonio Alonso to discuss the issue at hand. Alonzo's argument was that the faith that the markets have in Spain would be damaged by the Partido Popular's plan for debate. The minister for tax and the economy Elena Salgado, agrees with Alonzo that consumer spending could be damaged however, she does not feel that GDP would be affected. The Partido Popular is sticking by their demand for debate in congress and requests that the increase be suspended until such debate takes place.
Spain adopted the Euro (one Euro= 100 Euro cents) as the countries official currency in 2002. Spain uses the Euro in the following denominations: 1/2/5 cent coins which feature the Santiago de Compostela cathedral, 10/20/50 cent coins which feature the author Cervantes (Don Quijote),1 and 2 Euro coins which bare the image of King Carlos the I, and 5/10/20/50/100/200 and 500 Euro notes which do not depict any Spanish designs because the notes are the same throughout all of Europe. Since the Euro was introduced Spain has experienced a raise in the cost of living expenses because prices rounded up to the nearest Euro. Although Spain is considered one of the cheapest European Countries, many larger cities property prices are still very high in comparison with the earnings. Here are some examples to get a rough idea of some of the living costs in Spain:
Electricity: 35-40 Euro/per month per 2 people Telephone: 25 Euro/per month plus calls Eating out: 12 Euro/per person Movie theater tickets: 6 Euro/per person
In 1986 Spain joined the European Union and immediately began to become a prime example of what a nation can accomplish with a steady continuous high growth performance. Before joining the union, Spain’s per capita income was way below the average for the EU. However, shortly after joining the EU, the nation made a dramatic shift in their per capita income and climbed slightly above the EU’s per capita income. An economist in 2007 by the name of Matilde Mas of the Universitat de Valéncia and Ivie, questioned if Spain would continue to marvel or if the nation’s growth would run out of steam.
Many experts examined Spain’s growth process and pinpointed some weaknesses this process had. Spain’s growth after joining the EU, was too reliant on the additional use of labour and did not have any concern for increasing productivity. Although this process may have helped Spain in the beginning when they first joined the EU, the reliance of additional labour will not be sustainable in the future.
Others argue that Spain’s criticism is not fair because certain caveats exist. Many experts seem to ignore how poor Spain was when they first entered the EU. Still present in Spain’s economy today are the high unemployment rates, the low percent of women in the labour force, the large presence of the primary sector, and the low level of labour qualification. One important source of growth that Spain had was the combination of physical capital and drastic improvements in labour quality. Many economists believe that Spain’s economic growth would be more productive, especially over the long run, if it could transform to having better instead of simply more employment. If Spain could accomplish this, their economic growth could become more intensive and less extensive.
n 1986 Spain joined the European Union and immediately began to become a prime example of what a nation can accomplish with a steady continuous high growth performance. Before joining the union Spain’s per capita income was way below the average for the EU. However, shortly after joining the EU, the nation made a dramatic shift in their per capita income and climbed slightly above the EU’s per capita income. An economist in 2007 by the name of Matilde Mas of the Universitat de Valéncia and Ivie, questioned if Spain would continue to marvel or if the nation’s growth would run out of steam.
Many experts examined Spain’s growth process and pinpointed some weaknesses this process had. Spain’s growth after joining the EU, was too reliant on the additional use of labour and did not have any concern for increasing productivity. Although this process may have helped Spain in the beginning when they first joined the EU, the reliance of additional labour will not be sustainable in the future.
Others argue that Spain’s criticism is not fair because certain caveats exist. Many experts seem to ignore how poor Spain was when they first entered the EU. Still present in Spain’s economy today are the high unemployment rates, the low percent of women in the labour force, the large presence of the primary sector, and the low level of labour qualification. One important source of growth that Spain had was the combination of physical capital and drastic improvements in labour quality. Many economists believe that Spain’s economic growth would be more productive, especially over the long run, if it could transform to having better instead of simply more employment. If Spain could accomplish this, their economic growth could become more intensive and less extensive.
