This ad will auto close in 10 seconds

Spain govt announces $79 billion austerity package

Last Updated: Wednesday, July 11, 2012 - 18:47

Zeebiz Bureau

Madrid: Spain's government on Wednesday announced a 65 billion euro (USD 79.85 billion) austerity package to be shaved off the state budget over the next two years by hiking sales tax and cutting on spendings.

The move comes a day after the 17-member eurozone agreed to extend Spain’s deadline to meet its deficit target by a year.

Spain, suffering from the one of the worst crisis in the eurozone, has been weighed down by bad debts due to recession and housing crash.

Agreeing to the terms of a bailout package for Spain, the finance ministers of the eurozone on Tuesday said that euro 30 billion (USD 36.88 billion) could be available this month on basis of urgent need. The ministers have set a maximum of 100 billion euros (USD 123 billion) for the rescue package.

Announcing the austerity package in the Parliament on Wednesday, Prime Minister Mariano Rajoy warned that Spain's future was at stake as it grapples with recession, a bloated deficit and investor wariness of its sovereign debt.

``We are living in a crucial moment which will determine our future and that of our families, that of our youths, of our welfare state,'' said Rajoy.

``This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice.''

The spending cuts, designed to cut (euro) 65 billion of state budgets by 2015, include a wage cut for civil servants and members of the national parliament and a new wave of closures at state-owned companies. Spain will also speed up a gradual increase in the retirement age from 65 to 67.

Spain, the fourth-largest economy in the eurozone has been struggling to keep a lid on its government deficit in the midst of a recession while trying to support its troubled banking industry. There are fears that should Spain need a bailout of its own, the eurozone would struggle to finance it, pushing the region further into recession.

The jobless rate in Spain is nearly 25 per cent and the forecast is for the economy to shrink 1.7 per cent this year. The country is mired in its second recession in three years. The concern among investors and Europe-watchers is that further austerity cuts will push Spain's economy further into recession, making it even harder for the government to trim its deficit.

With Agency Inputs

First Published: Wednesday, July 11, 2012 - 12:51
comments powered by Disqus