Spain's Prime Minister Mariano Rajoy announced that his government will implement €65bn ($79bn) worth of spending cuts in a major effort to reach budget-deficit goals that were agreed with the troubled country's European partners.
The Socialist-led government also plans to collect 4.3 percent more tax revenues this year at €167.8bn ($206bn). This announcement by the government coincided with rally organized by miners in the capital Madrid, where protesters were fired upon with rubber bullets by the police.
These new measures will be applied until 2014, although that left many economists asking just how quickly can the Spanish economy rise from recession given the significant austerity measures.
Other austerity announced by the government include increasing the standard rate for value-added tax from 18 per cent to 21 per cent, while the lower rate will also be increased from 8 percent to 10 percent. This solution is a major change in policy and contradicts previous government position that such tax increases will hurt consumer spending, hinder growth and make the lives of the poor even more difficult.
Rajoy also said that the government will slash jobless benefits for new claimants, cut salaries of workers in the public sector by 7 percent, implement reforms in the local government that will result to billions of euros in savings.
Despite constant interruption from opposition MPs, the prime minister firmly stated that parliament needs to proceed with the announced changes and they should be implemented without delay.
During the summit between eurozone finance ministers Monday, it was agreed that Spain's budget-deficit targets will be eased to 6.3 per cent of gross domestic product (GDP) this year, 4.5 pe cent in 2013 and 2.8 per cent in 2014. Last year, the deficit was 8.9 percent of GDP.
Eurozone finance ministers have also agreed to help Spain's troubled banks with €30bn in fresh capital infusion by the end of the month.
MADRID (AFP) - Spain's Prime Minister Mariano Rajoy announced Wednesday a 65-billion-euro austerity package to avert financial collapse as angry miners rallied against subsidy cuts. Rajoy, interrupted by howls from opposition members as he outlined the cuts, performed a U-turn by ramping up value added sales tax having promised he would not raise it, and took an axe to state expenditure
Spain PM announces 65 bn euro austerity package
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