By David Román
MADRID--Spanish Prime Minister Mariano Rajoy announced a 1% wage
increase for Spain's civil servants on Friday, the first in five
years, as he unveiled a government budget for 2016 that seeks to
address austerity fatigue in the run-up to parliamentary
elections.
The budget, to be presented to parliament on Tuesday, includes a
0.25% increase in monthly payments for pensioners, a reliable
voting bloc for Mr. Rajoy's conservative Popular Party.
The Spanish leader also announced that EUR750 million ($831
million) in bonus payments for civil servants would be distributed
in three batches--one in September and two next year. Spain's three
million civil servants make up about 14% of the workforce. The
bonus payments were frozen between 2012 and 2014.
"It is time to give back to society, after all the sacrifices in
all these years," said Mr. Rajoy, who is seeking re-election in
what is expected to a close race against leftist critics of his
government's austerity measures. "That effort has allowed us to
keep our welfare state in place."
Taking office in late 2011, Mr. Rajoy's government raised taxes
and cut spending to confront Spain's worst recession in decades.
The economy began growing two summers ago but unemployment remains
among the highest in Europe, at 22.4%
Mr. Rajoy, speaking to reporters after a cabinet meeting, said
that the proposed budget marks the end of a painful period of
cuts.
Patxi López, a senior official in Spain's opposition Socialist
Party, called the wage and pension increases a last-minute offering
of "little sweets for kids" that seeks to buy votes. He said that
the financial commitments will tie the hands of the next
government.
Mr. Rajoy must call the election by the end of this year. At
Friday's news conference, he dodged a question about its date.
Ireland and Portugal, which like Greece received European Union
bailouts, have also chafed under unpopular austerity measures.
Portugal has vowed to boost government spending, as Ireland is
doing this year. Portugal will hold a general election on Oct. 4,
and Ireland must hold one no later than next spring.
Mr. Rajoy's party leads opinion polls with 27% of likely votes,
according to an average of several surveys over the past month
compiled by the Politikon think tank. But the center-left
Socialists and the far-left Podemos party--likely to ally in
parliament if they secure enough seats together to topple Mr.
Rajoy--are polling 24% and 18% of likely votes, respectively.
Ciudadanos, a center-right party that is a possible coalition
partner for both Mr. Rajoy's party and the Socialists, is fourth
with 12%.
Like its EU partners, Spain faces budget deficit limits and is
committed to achieving a primary budget surplus, excluding debt
servicing costs. Mr. Rajoy said on Friday that Spain expects to
post a primary surplus of 0.1% of gross domestic product in 2016,
its first in eight years.
Spain's statistics institute said on Thursday that the economy
expanded 3.1% in the second quarter of this year, over the same
period last year, the fastest rate since the start of a property
bust that sent the economy into a tailspin in 2008. That growth
underpins Mr. Rajoy's plan to expand the central government budget
next year--to EUR351.9 billion, up 1.2% from this year's
budget--while cutting the deficit.
However, independent economists say that election-year spending
promises by the central and regional governments will make it hard
to meet Spain's budget deficit targets--4.2% of gross domestic
product this year and 2.8% of next year.
"We are also concerned about near-term fiscal pressures, and
expect the general government budget deficit to stand at 4.8% of
GDP in 2015 and 3.6% in 2016," said Raj Badiani, an economist with
IHS Group.
Write to David Román at david.roman@wsj.com