Guindos Demands EU Accept Spain Can Cut Taxes and Its Budget Gap

  • Incumbent People’s Party promises to cut taxes by 2 points
  • Spain holds second general election in six months on June 26

Acting Economy Minister Luis de Guindos defended his party’s pledge to lower Spanish taxes again even as the country risks a fine from European authorities over his government’s last pre-election handout.

Cutting the burden on families would help fuel growth and maintain the pace of job creation, de Guindos told reporters in Madrid Tuesday with Spain gearing up for a second general election in six months on June 26.

“Lowering taxes is perfectly feasible and compatible with narrowing the public
deficit, the trick is to keep growing,” he said. “Plus, it will have a positive impact, which is want Brussels is demanding.”

That’s the same line de Guindos was pushing in December as his boss Mariano Rajoy used fiscal policy in a bid to sway voters before the last ballot. As a result, Spain missed the deficit target set by the European Union by almost 1 percent of gross domestic product and the European Commission is now analyzing whether to impose a fine.

Rajoy has vowed to cut taxes again if he leads the next government. He said he’ll lower income tax by 2 percentage points for the lowest and highest earners as he promises economic stability and more jobs for middle class Spaniards. The Spanish government blamed regional spending and an overshoot in social spending for last year’s deficit miss, arguing that lowering taxes had helped consumption.

While Rajoy has almost halved the nation’s deficit during his four-year tenure, Spain has persistently missed its targets and will need an extra year to bring the shortfall below 3 percent. The commission is set to decide whether to levy a fine in July, having delayed the decision to avoid a clash with the June election.

Polls show Rajoy’s party extending its lead, but still short of a majority in another highly fragmented parliament. Anti-establishment group Podemos and its new ally, United Left, are project to overtake the Socialists in second place.

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