Spain unveils $36 billion austerity package

Last Updated: Saturday, March 31, 2012 - 00:30

Madrid: Spain`s new conservative government
unveiled a USD 36 billion deficit-reduction package for this
year, that it hopes will convince its partners in Europe and
wary international investors that it won`t need a bailout.

The measures announced today include big spending cuts and
tax increases on large companies, but there was no increase in
the sales tax, as had been widely-predicted in the run-up to
the administration`s first fully-fledged budget.

Finance Minister Cristobal Montoro said it was the biggest
deficit cut since Spain regained democracy in 1977 after the
death of Gen. Francisco Franco.

Spain is having to take drastic measures to get a handle
on its debts, even at a time of recession which has seen
unemployment balloon to nearly one in four, as investors
remain sceptical that it can avoid the same bailout fate that
befell Greece, Ireland and Portugal.

"We are taking extraordinary measures because the
situation is extraordinary," Montoro told a news conference
after a Cabinet meeting at which the budget plan was passed.

The blueprint will go to Parliament on Tuesday and is
expected to be formally passed in June. The plan is that Spain
will reduce its budget deficit to 5.3 per cent of its gross
domestic product from 8.5 per cent last year.

The challenge is doing so as the economy is in recession
and unemployment stands at nearly 23 per cent.

Spain`s economic output last year was worth a little over
a trillion euros, or double the size of the three bailed out
economies combined.

Many in the markets think the euro`s long-term viability
rests on whether the country can avoid a bailout that would
stretch the resources of its partners in the 17-country
eurozone.

Deputy Prime Minister Soraya Saenz de Santamaria said the
2012 draft budget calls for cutting central government
ministry spending by an average of nearly 17 per cent and
freezing civil servant wages.

Overall government spending will be cut by USD 22.6
billion.

PTI



First Published: Saturday, March 31, 2012 - 00:30

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