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More austerity for Spain

September 27, 2012

The Spanish government has announced its toughest package of austerity measures yet, as it seeks to bring down the country's high budget deficit. This comes despite two days of sometimes violent protests in Madrid.

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(L-R) Spain's Minister of Economy and Competitiveness Luis de Guindos, Spain's First deputy prime minister and government spokeswoman Soraya Saenz de Santamaria, and Spain's Minister of Treasury Cristobal Montoro hold a press conference to present a budget for 2013 at the Moncloa Palace in Madrid, Spain, 27 September 2012. The Spanish government approved a tough austerity budget for 2013 in its struggle to ward off an international bailout, defying new protests against its spending cuts. The government did not immediately put figures on the budget cuts, which had earlier been estimated at a total of 40 billion euros (51 billion US dollars).
Image: picture-alliance/dpa

Spain's conservative government unveiled 40 billion euros ($51 billion) in spending cuts in its 2013 budget on Thursday.

The austerity measures are the toughest yet as the government of Prime Minister Mariano Rajoy battles to bring down one of the biggest budgetary deficits among the 17 countries that use the euro common currency.

The bulk of the cuts are to government ministries, which are to see their budgets cut by an average of 8.9 percent next year.

"This is a crisis budget aimed at emerging from the crisis ... In this budget there is a larger adjustment of spending than revenue," Deputy Prime Minister Soraya Saenz de Santamaria (center in picture) told reporters following a six-hour cabinet meeting.

Spanish government to tighten belt in 2013

Despite the need to reduce the deficit, Rajoy's government did approve spending increases in a few areas. De Santamaria said these included “pensions, scholarship funds and interest on the debt."

The government is hoping to raise new revenue through a rise in value-added tax, which consumers pay on goods and services.

De Santamaria said the government hoped to return the economy to positive growth in 2014.

Protests turn violent...

The austerity measures come despite two days of protests in the Spanish capital, Madrid, where thousands of demonstrators gathered outside parliament.

Protests turned violent overnight on Tuesday when officials estimated 6,000 demonstrators took to the streets of Madrid. Police fired rubber bullets at some protesters as they attempted to break into the parliament building.

The Spanish newspaper El Pais reported more than 60 people were arrested, almost half of whom were police officers. Police also made 26 arrests.

As unpopular as the cuts may be at home, there was quick praise from Brussels for the latest austerity measures.

"The comprehensive reform plan ... is a major step to broaden and deepen structural reforms ... (it) includes concrete, ambitious and well-focused measures and establishes clear deadlines in many areas," the European economics commissioner, Olli Rehn said.

Despite the latest financial reforms, many expect Spain to struggle to meet budgetary targets agreed with the EU; a deficit of 6.3 percent of gross domestic product in 2012 and 4.5 percent in 2013. Even it it does meet these targets, they would still leave the country well above the eurozone's deficit ceiling of three percent of GDP.

pfd/msh (Reuters, AP, dpa)