Spain unveils new austerity measures, to cut deficit
MADRID SPAIN on Friday announced a drastic austerity budget, proposing savings of 27 billion euros (35 billion dollars) amid growing international concern over its fiscal health.
Finance Minister Cristobal Montoro described the 2012 budget as the most severe since Spain became a democracy in 1975.
The measure is expected to pass easily in parliament, as the ruling People’s Party has an absolute majority there.
The budgets of ministries would be slashed by nearly 17 percent, Deputy Prime Minister Soraya Saenz de Santamaria announced.
The government would also increase taxes on large companies, court fees, electricity tariffs and freeze civil servants’ salaries.
It will not touch pensions, unemployment benefits or scholarships, nor hike up value-added tax.The goal was to cut the deficit without paralysing Spain’s economic recovery, Santamaria said.
Prime Minister Mariano Rajoy’s conservative government is struggling to trim the budget deficit from 8.5 percent of gross domestic product in 2011 to the 5.3 percent target agreed with the European Union for this year.
The initial 2012 target was 4.4 per cent, but Brussels allowed Madrid to relax that goal after it came out that the previous Socialist government had significantly missed the 6 percent target set for 2011.
The budget was presented just one day after a general strike paralysed factories and disrupted public transport, bringing nearly a million demonstrators to the streets around the country.
The strike, which was marked by violent incidents, protested a labour market reform lowering severance pay and the government’s austerity policies.