Spain announces huge cut in hiring of civil servants as part of austerity plan

Spain slashes hiring to cut deficit

MADRID — Spain’s government announced a 90 percent cut in hiring of civil servants as part of an austerity plan designed to chip away at a ballooning budget deficit.

The government will hire 1,989 people this year, compared to 15,084 last year, and will thus save €280 million ($378 million), Deputy Prime Minister Maria Teresa Fernandez de la Vega told a news conference after a Cabinet meeting.

In late January the government announced spending cuts of €50 billion to reduce the deficit from 11.4 percent of GDP last year to 3 percent in 2013 in accordance with the EU limit. The outsized deficit has prompted fears that Spain might fall into a debt crisis like that which has engulfed Greece.

Despite the virtual freeze in hiring of civil servants, the government says it has no plans to reduce their salaries as other deficit-laden countries have, such as Ireland.

The government’s road map for reducing the deficit is based in part on a growth forecast that the Bank of Spain on Tuesday called overly optimistic.

The official forecast for 2010 is GDP contraction of 0.3 percent and growth of 1.8 percent in 2011. But the country’s central bank said it sees a drop of 0.4 percent this year and expansion of just 0.8 percent next year.