By Alyssa McMurtry
OVIEDO, Spain (AA) – Spain’s finance minister said on Thursday that “the UK shows us the path not to follow” on fiscal policy.
Mincing no words, Nadia Calvino said the market reaction to the UK government’s “massive decrease in taxes” has been a “disaster.”
Last week, the new UK administration headed by Prime Minister Liz Truss announced a £45 billion ($49 billion) package of tax cuts — the largest in 50 years — that experts say will largely benefit the wealthy.
The announcement spooked the markets, sent the pound plummeting, and elicited a rare warning from the International Monetary Fund.
“The markets lost confidence in the UK to such a point that the Bank of England had to start buying public debt, which goes against its other monetary policy,” Calvino told broadcaster Antena 3 in an interview.
She said the Spanish government’s position is that any adjustments to the taxation system must be fiscally responsible and progressive while also acting to bring down inflation.
Her comments come amid an ongoing fiscal war within Spain’s borders.
In recent weeks, regional governments led by the conservative Popular Party have announced moves to lower or eliminate taxes on wealth and income as they compete to attract the highest earners.
Ahead of a major election year in 2023, the left-wing government of Valencia also announced new tax breaks, but this time for the middle and working classes.
“A destructive race to the bottom isn’t a coherent vision for the country and goes against our argument against tax havens internationally. The race to the bottom makes us all poorer,” said Calvino.
Meanwhile, Spain’s central government is preparing a new package of fiscal measures, which include a temporary wealth tax, higher taxes on top earners, and fiscal benefits for the lowest earners, Treasury Minister Maria Jesus Montero said on Wednesday.