Government increases growth forecast and brings forward Personal Income Tax reduction to 1 July

Círculo de Bellas Artes, Madrid

During his speech, Mariano Rajoy highlighted that the Spanish economy has grown by 0.9% in the first quarter of the year and that the Bank of Spain predicts even higher growth for the second quarter. That led to his announcement that the government will upwardly revise the growth forecasts for 2015 and 2016 in July. GDP will grow by 3.3% this year, compared with the 2.9% originally forecast, and by 3% for next year, compared with the 2.9% originally forecast.

The President of the Government underlined that jobs are being created "steadily and at a faster rate", as shown by the employment and National Insurance contributor figures corresponding to the month of June. Whilst 400,000 jobs were created in the whole of 2014, National Insurance affiliation has already increased by 480,000 in the first half of the year. "Our target of creating 1 million jobs between 2014 and 2015 is clearly within reach", he said.

He also pointed out that the target is to reach 20 million contributors to the Social Security system by the end of the next term of office. "If we manage to create 1 million jobs in the second half of this term of office, our ambition must be to create another 2 million jobs in the next term".

Pool MoncloaMariano Rajoy added that achieving this level of employment is what the country as a whole needs in order to guarantee pensions and public services. "I am going to do my utmost to that end because there is no greater or more noble political task than for Spain to once again be a country with jobs and opportunities for one and all".

The President of the Government also highlighted that Spain has spent the last 21 months improving its level of competitiveness vis-à-vis the main Euro economy of Germany and exports represent 32.4% of GDP. "This percentage is higher than that posted by the USA, the UK, Japan, France and Italy. We have posted a foreign trade surplus each of the last two years and forecasts point to maintaining this in 2015 and for the next three years.

Moreover, he recalled that Spain "will meet its budgetary stability target established by the EU authorities, as in previous years". According to the President of the Government, the change experienced over the last three years "is what the Spanish people wanted, has been led by them and must now be consolidated".

Longest expansive cycle ever

Against this backdrop, Mariano Rajoy claimed that "unless the change started in 2011 is stopped, we could be looking at the longest expansive cycle ever because the foundations have been laid for a new, healthier, better balanced and sounder model". An economic model in which "we grow because we produce and we export, in contrast to what happened previously, when we only grew by becoming indebted by buying what others produced".

The President of the Government stressed that "the challenge facing us now is very clear: consolidate this model, avoid backsliding and extend the benefits to the greatest number of Spaniards possible".

On another note, Mariano Rajoy announced that our citizens are right in demanding that the government be more forthright in the fight against corruption, more sensitive regarding problems such as exclusion and inequality, more humble regarding complaints and more convincing when proposing national projects.

However, he argued that "it is not a question of changing policies, because the Spanish people continue to demand policies that lead to growth and job creation", and hence, on the major policies, the government will maintain its principles: seriousness in the public accounts, reforms and support for entrepreneurs.

Budget and lower Personal Income Tax (PIT)

Pool MoncloaThe President of the Government confirmed that the government will present and push through the General State Budget for 2016 because "it is what is best for Spain and what it needs". The Budget will be "the instrument to offer security to the Spanish people, to the various economic agents and to the markets".

Moreover, he announced that, given the current state of execution of the Budget for this year, the government will bring forward the second part of the reduction in Personal Income Tax to 1 July that was scheduled for January of 2016. "This will lead to an additional payment for contributors of some 1.5 billion euros this year and will be applied to salaries with effect from1 July. In other words, all workers will see a reduction in withholdings in their payslips just as they did in January this year", he remarked.

Mariano Rajoy also announced that the PIT withholding rate of 15% will be extended to all professionals (to date it was only applicable to those on income of less than 15,000 euros). "This will help improve the liquidity and ability of taxpayers to invest through their professional activity", he stressed.

On the subject of education, he declared that the government will study new proposals to optimise the results starting to come through as a result of the Law on Educational Quality. The government will also continue to take steps in the Reform of the Public Administration Services, which has already resulted in a reduction of more than 2,000 public bodies and companies and has generated savings for an amount in excess of 20 billion euros, according to the President of the Government.

Mariano Rajoy: the Euro is here to stay

Mariano Rajoy stressed that one of the main lines of action of the government since the start of the legislature has been "to do battle in Europe" to ensure greater economic integration that fosters growth in Member States. Among the progress made in this area over the last three years, he mentioned Banking Union, the Fiscal Treaty and an active policy from the European Central Bank.

Pool MoncloaAs regards the situation of Greece, he recalled that being a member of the Eurozone has guaranteed the country financial assistance from the other European Union countries amounting to some 200 billion euros (more than 26 billion committed by Spain). "It cannot be said with the slightest degree of respect for the truth that Europe has not been supportive of Greece", he stressed. "But, the Euro is not an a la carte club; it has rules and regulations that oversee the very survival of the Euro, rules that may also be applied with a certain flexibility but that are incumbent upon us all", he added. In his opinion, the political and institutional architecture of the EU requires responsibility and a desire for understanding, and it is incompatible with "unilateral decisions" and "faits accomplis".

In reference to Sunday's referendum in Greece, he said that "this will be a key date in the history of the Euro". "We all want and hope that Greece remains on-board this great political project, but what we cannot allow as an option under any circumstance is for a unilateral breach of the rules on the single currency, which would be tantamount to doing away with it", he declared.

The President of the Government acknowledged that the "uncertainty" of these last few days has affected the financial markets, but he stressed that the Treasury has managed to place 10-year bonds at lower prices than in the last issue. In his opinion, the correction of the imbalances in the Spanish economy means that "whatever happens with Greece, the Euro is here to stay and Spain will play an important role in its future".

Anniversary of 'Expansión'

The President of the Government highlighted that the 29 years of history of the newspaper 'Expansión' coincide with those, despite the crisis, that have also been the best years in Spain's recent past, a country that has become "modern, open and fully European", "integrated on all the main international forums and with thriving businesses that successfully compete in markets all around the world". Moreover, he praised the paper's commitment to the modernity of the country, to legal certainty, to driving the reforms through and the defence of effective and strict management of public affairs.