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11 July 2012

Reuters: Spain deepens austerity under European pressure


Prime Minister Mariano Rajoy announced a swathe of new taxes and spending cuts designed to slash €65 billion from the budget deficit by 2014, as recession-plagued Spain struggles to meet tough targets agreed with Europe.

Rajoy, of the centre-right People's Party, proposed a three-point hike in the main rate of Value Added Tax on goods and services to 21 per cent, and outlined cuts in unemployment benefit and civil service pay and perks, in a parliamentary speech interrupted by jeers and boos from the opposition. "These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros", Rajoy told parliament.

He also announced new indirect taxes on energy, plans to privatise ports, airports and rail assets, and a reversal of property tax breaks that his party had restored last December. However, he did not touch pensions - keeping one election promise - and said the tax burden was being shifted from direct taxes on labour and income to taxation on consumption.

With the latest measures, Rajoy completely overhauled his previous budget plan, in which the central government and 17 autonomous regions had put in place some €48 billion in savings for 2012, insufficient to bring the deficit into line.

It was not immediately clear exactly how much of the €65 billion headline figure was new savings. Rajoy announced reforms to city hall governments, shutdowns of public companies, reduced benefits for civil servants, budget cuts for political parties and labour unions.

Full article



© Reuters


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