IN line with Central Government's recommendations for bringing down the national deficit, the Balearic government made three formal proposals yesterday which it wants approved by regional Parliament.

The first aims to reduce public spending by 103 million euros. The second, meanwhile, is designed to reap 18 million euros a year through the introduction of an ecological tax on energy and communications companies which pollute the environment. The third tax targets the highest income earners from which the government hopes to collect between 15 and 20 million euros a year.

Details were emerging yesterday after a meeting of the Balearic government when regional Economy and Tax Minister, Carles Manera, explained that the first proposal includes a 5 percent reduction in the salaries of civil servants including those employed in the health and education sectors.

The draft law was read to attendees, as it is expected to pass unopposed through Parliament next Tuesday with the support of the Majorcan Unionist (UM) party.

The other two draft proposals, however, will be debated and processed in the usual way. Manera admitted yesterday that raising taxes for those earning over 100'000 euros a year by one percent and separately on inheritance is going to be very difficult to force through Parliament. The measure, he said, is opposed by both the UM and opposition Partido Popular (PP). Manera added nevertheless, that were the proposal to become law, the new tax demands could be applied from this year onwards.

By way of contrast, the Economy Minister was confident about coming to an arrangement with the Majorcan Unionists over creating an eco-tax on companies whose operations contaminate the environment. The UM have apparently already said they are “looking into the matter.” The Minister pointed out that these most recent measures to cut public spending and harvest further taxes were the direct result of Central Government's call for assistance in slashing the national deficit.

The 900 million euros of investment in the Balearics already agreed for this year is reportedly not going to be affected. Of this 900 million, 200 relates to funding from Central Government, 500 to regional budgets and a further 200 to health and education projects.

Manera claimed that the measures in the first proposal for bringing down spending by 103 million euros are in fact in addition to a regional budget reduction which this year was down by 220 million euros. In total therefore, the Minister said, spending for 2010 has declined by 8 percent compared to last year.

He said that this first proposal comprises not just the 5 percent salary reduction of civil servants, but also a pay cut of between 7 and 9 percent for senior government figures.

Any contracts for projects financed by public spending which are in excess of 6 million euros will now have to be approved by the ministry, explained Manera.

He said that in such cases, his department will be additionally responsible for providing a report on any related budgetary repercussions and financial commitments.

It was the Balearic government's intention, said Manera, to create a “pool of contracts” so that at the appropriate moment, the authorities could consult prices already quoted to them for supplies and services.

In terms of the second draft proposal related to tax on pollution, Manera said that it is giants such as GESA who are likely to be targeted because of their role in transporting electricity, solid fuels, and liquids and gases. Clean and renewable energy companies will be exempt from the tax.

The Minister said that such a tax had previously existed in the Balearics but it had been eliminated after an appeal made to a Constitutional Court in Madrid by the private operators affected by it.