1. Econ 322 Group Project BY KHANH NGUYEN AND LIAM JOUETT

2. Background of Government Spain’s Government is a Parliamentary Monarchy. 3 Branches of Government (Executive, Judicial, and Legislative) Chief of State serves as the figure head of the government, while the Prime Minister acts as the head decision of the government. Ministry of Finance along with Prime Minister are responsible for tax policy. Economy is one approximated as the 5 th largest in the Eurozone.

3. Tax & Spending Policies Tax – Spain has lower tax rates than the average OECD country. As of 2014 they generated a tax revenue of 10,148 Billion (US Dollars). Their tax system is a progressive tax system. Spending – The government’s main expenditures are Social Security, Public Health and Education.

4. Taxa Data 2008 Tax Revenue = 11,573 Billion (US Dollars) - Sources of Tax Revenue: 1.Personal Income Tax = 6.92 % of GDP 2. Corporate Profits Tax = 2.7 % of GDP 3.Tax on Payroll = 2.57% of GDP 4.Tax on Goods and Services = 8.01 % of GDP - All Taxes were below the OECD average.

5. Government Spending 2008 Total Governemnt Spending in 2008 = 41.1 % of GDP - The Main Expenditure being Social Security 2008 = 11.83 % of GDP -Followed by expenditure on Public Health = 6% of GDP -At time of crisis in 2008 Budget Deficit = 4.42 % of GDP -In 2009 Budget Deficit increased to 10.16 % of GDP

6. Pre 2008  Spain economy was growing rapidly (the debt to GDP ratio was falling)  Housing boom after joining the EU (Cheap loan to buyer and builders)  Much like in the US Spain house prices was on the rise (44% increase 2004-2008)

7. Pre 2008  The Spanish Nominal GDP has been steadying increasing since the mid- nineties  Started to slow down in 2006  Descending into the recession from 2006 into 2008

8. The Great recession (Impact)  In late 2008 Spain economy enter recession  The housing bubble burst  GDP drop dramatically

9. The Great Recession (unemployment) Spain unemployment rate Youth Unemployment rate

10. Government Respond  2009  Increase of VAT’s general rate to 18%  Elimination of the deduction of €400 on Personal Income Tax  Reduction of ministries expenditure (€8,000 million)  Spain create a bail out fund for their bank of 100 billions euros  2010  Setting of limits to hiring in the civil service (one entry per ten exits)  Reduction of ministries expenditure (€5,000 million).  Suppression of monetary incentives to childbirth (elimination of the baby-check)  5% reduction in public sector’s wages  Pensions’ freezing  Cuts on medicines and public works expenditure.

11. Government Respond  2010 Late  Increase of Personal Income Tax for high income groups  Reduction of ministries expenditure (€13,200 million).  Increase of taxes on tobacco  Privatization of public enterprises – National Lotteries (Loterías del Estado) and Airports (AENA)  2011  Anticipation of payments on account of the Firm’s Income Tax  Additional cuts on medicines spending.  Spain raises the retirement age from 65 to 67

12. Government Respond  There are two main reform the government hope to accomplish  First is the Banking sector reform  Raise the minimum requirement for core capital to 8% or 10% of risk-weighted assets  recapitalization of banking entities  Second is the labor market reform  Consider to be a relatively conservative

13. Spain Future  Current report is showing that Spain economy is slowing coming back  GDP per capita 29,863  GDP growth at 3.1%  Unemployment rate 22.7%  Labor force is increasing at 23 millions

14. Reference Krugman, Paul. 2009. “The Pain in Spain …” The New York Times. November 27, 2015 Bentolila, Samuel, Juan José Dolado, and José Francisco Jimeno. 2008. “Two-Tier Employment Protection Reforms: The Spanish Experience.” CESifo Database for International Comparisons in Europe (DICE) Report 4/2008. Krugman, Paul. 2010. “Anatomy of a Euromess …” The New York Times. November 27, 2015 Spanish Economic Crisis Summary. (n.d.). Retrieved November 27, 2015, from http://www.economicshelp.org/blog/5525/economics/spanish-economic-crisis- summary/

15. Reference "Spain's Economic Crisis: A Timeline." The Telegraph. Telegraph Media Group, n.d. Web. 27 Nov. 2015. Carballo-Cruz, Francisco. "Causes and Consequences of the Spanish Economic Crisis: Why the Recovery Is Taken so Long?"Panoeconomicus 58.3 (2011): 309- 28. Web. 27 Nov. 2015. OECD.org. (n.d.) http://www.oecd.org/ Spain: Economy. (n.d.) http://globaledge.msu.edu/countries/spain/economyhttp://globaledge.msu.edu/countries/spain/economy