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Spain to limit executive pay at state-owned companies

Rajoy’s government estimates salary cuts of up to 35% as it tries to assuage public anger as well bridge €40bn budget gap

Spain’s conservative government has renewed its crackdown on executive pay in companies supported by taxpayers’ money as it obliges senior managers to share the pain of austerity.

In the third of a series of measures designed to assuage anger over tax-funded executive pay, it announced on Friday that basic annual salaries at state-owned firms would be limited to €105,000 (£87,000) – though it has left room for government-approved productivity bonuses.

This would cut the average senior executive salary by up to 35% at about 4,000 state-owned and partly state-owned firms, the right-wing People’s party (PP) government of Mariano Rajoy calculated.

“These salaries are noticeably lower than in the private sector, but they are still reasonable wages … at a time of austerity,” said the deputy prime minister, Soraya Sáenz de Santamaría.

At smaller public companies the wage caps were set at €80,000 and €55,000, including perks. The number of directors – often political appointees – was also curbed.

The Spanish government has to make a €40bn adjustment, equivalent to almost 4% of GDP, in this year’s budget.

Some €15bn has been found from spending cuts and tax rises, but further measures are expected soon – with these set to push Spain deeper into a recession. The economy is expected to shrink 1.7% his year, according to the International Monetary Fund.

The measures come on top of last week’s decision to cancel golden handshakes to executives fired from banks taken over by the state.

Spaniards had been outraged at the €1m payoffs at bankrupt savings banks where executives had approved giant payments for themselves if they were laid off.

The fact that taxpayers would, in effect, be paying these to the executives who bankrupted Caja de Ahorros del Mediterráneo or Caja Castilla La Mancha – both of which needed rescuing – had added insult to injury for Spaniards suffering 23% unemployment and a double-dip recession.

That recession was caused, in part, by a housing bubble pumped up by loans from those same banks that now need taxpayer help.

Rajoy’s government has also limited executive pay at nationalised banks to €300,000 and to €600,000 at banks that have borrowed from the state.

That meant a 75% pay reduction for the former IMF chief Rodrigo Rato, who is now chairman of the Bankia bank. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds