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Spain set to approve budget to increase role of state and taxes

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Spain is set to approve a budget that will lead to an increase in the tax take, more spending on social services and a landmark use of money from the EU’s coronavirus recovery fund, according to María Jesús Montero, the minister steering the measure through.

Prime minister Pedro Sánchez has been trying to pass a budget since coming to power in 2018 — his failure to do so last year precipitated a general election. But Ms Montero, who has held the budget brief for all that time, expressed confidence that the Socialist-led government would win Congress’s backing this week for its 2021 plans, even though it holds only 155 out of 350 seats.

“Everything indicates that we are almost there,” she said in an interview with the Financial Times. “This budget is an urgent necessity and it is going to allow us to realise many of the commitments we made on taking office.”

Even opposition politicians concur that approval of the budget is likely to cement Mr Sánchez’s hold on power — possibly until the 2023 end of the legislature. But secessionist parties’ support for the measure has proved hugely controversial within Spain.

The chamber of deputies is due to vote on the budget on Thursday, and the country’s Senate is likely to give final approval before the end of the year. 

People walk past Christmas lights at Gran Via Street on November 26, 2020 in Madrid, Spain. © Pablo Blazquez Dominguez/Getty

Ms Montero, a trained doctor and former hospital administrator, said that planned tax rises for high earners and big corporations would be a first step towards increasing Spain’s overall tax take towards the European norm, in line with greater expenditure on social services.

She acknowledged that Spain’s decision to increase such levies during the pandemic stood out from much of the rest of the EU. But she said that, with a tax take of about 39 per cent of gross domestic product, the country is about seven percentage points below the EU average. 

“Just as there is this seven-point gap in terms of revenues, there’s a gap in expenditure,” she said. “And this is what we want to correct, in a reasonable way, during the lifetime of the parliament.”

The budget sets out a 10 per cent increase in social spending — including on unemployment benefit, pensions, health and education.

According to European Commission forecasts, Spain is by some distance the EU economy worst hit by the pandemic and is due this year to run the biggest budget deficit as a percentage of GDP, at 12.2 per cent.

But Ms Montero argued that the Socialist-radical left government’s plans were sustainable, adding that the budget would reduce next year’s deficit by more than three percentage points. 

The government is also anticipating almost €1bn in revenue from a new digital services tax included in the budget, and Ms Montero held out hope that the EU could agree a worldwide regime for such levies with the incoming Biden administration.

Suggesting that an EU budget stand-off with Hungary and Poland was likely to be resolved soon, she also said that Spain intended to use all of the approximately €140bn it expects to receive from the bloc’s €750bn coronavirus recovery fund over the next six years — money made up in broadly equal parts by grants and loans. Some government officials had previously suggested that Madrid might not take up all of the €70bn of loans available.

“Spain needs the totality of these resources,” she said, adding that the EU funds would add some two percentage points to the country’s annual growth rate in coming years.

But she acknowledged that such estimates depended on the country’s “absorption capacity” — its ability to use the funds efficiently. The 2021 budget already includes €27bn Spain is borrowing against the prospective grants from the EU fund, months ahead of any formal authorisation by the bloc. “To be able to absorb €27bn extra for a budget, we are going to have to strengthen administrative capacities,” she said.

She added Spain would continue to use EU funds, such as the bloc’s SURE scheme, to help finance the country’s temporary leave programme, which now covers around 730,000 people compared with 3.5m in the early months of the pandemic.

“We are aware that there will be a limit [on the number of people leaving the furlough schemes], until tourism comes back and mobility restrictions are waived,” she said. “We are going to have to keep protecting the [tourism and hospitality] sector; hopefully the vaccine will allow us to overcome this illness in the first half of next year.”

Within Spain controversy over the budget has focused on the decisive support for it from the Republican Catalan Left, a party that seeks Catalonia’s independence and, in particular, EH Bildu, a far-left Basque secessionist party. EH Bildu is led by Arnaldo Otegi, a former member of the violent group Eta, which killed hundreds of people during a five-decade terror campaign that lasted until 2011.

The government’s deals with such groups led the centrist Ciudadanos party to declare last week that it would vote against the budget, while leading Socialist party figures have also expressed deep unease.

Guillermo Fernández Vara, the Socialist leader of the regional government of Extremadura, said this month that Mr Otegi’s role in deciding the budget left him in need of anti-nausea drugs. Felipe González, Socialist prime minister for 14 years in the 1980s and 1990s, added last week that he would not “do a deal with those who want to destroy the country”.

But Ms Montero argued that the government had sought agreement with all political parties, adding that recent decisions to move Eta prisoners to or close to the Basque country had nothing to do with the budget negotiations 

“At this moment you shouldn’t talk so much about who you are voting with, but what we are voting on,” she said. “This country can’t go on with a budget that dates from 2018 and without approving the €27bn from Europe. The ones who have to explain themselves are those who are voting no.”



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Global house prices: Raising the roof

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Global house prices: Raising the roof



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Missing Belarus activist found hanged in Kyiv park

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Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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