Spain Unveils Austerity Budget

30 Mar 2012

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 Newly-elected Prime Minister, Mariano Rajoy 


The Spanish government is cutting 27bn euros ($36bn) from its budget this year as part of one of the toughest austerity drives in its history.

Changes will include freezing public sector workers' salaries and reducing departmental budgets by 16.9%.

The government says it will raise 12.3bn euros this year, aided by an increase in tax for large companies, reports BBC.

Deputy Prime Minister, Soraya Saenz de Santamaria said the nation was in an "extreme situation".

"Our top priority is to clean up public accounts," she said.

Electricity prices will rise by 7% from 1 April, said Energy Minister, Jose Manuel Soria.

Newly-elected Prime Minister, Mariano Rajoy had warned the budget would be "very austere".

On Thursday, Spanish police clashed with protesters after a general strike protesting against labour reforms, which are designed to tackle the country's record unemployment rate.

Separately, eurozone ministers have agreed the expansion of Europe's bailout reserves.

The ministers, meeting in Copenhagen, have decided to boost the joint lending power of the "firewall" to 800bn euros.

Investors - worried about a bailout for Spain or Italy - wanted the fund to increase from its current size of about 500bn euros to closer to 1 trillion euros. But there was resistance from Germany to an increase of that scale.
Bailout fears

On Thursday, police clashed with demonstrators as hundreds of thousands swamped streets in Barcelona and other cities.

Unions said 800,000 people joined the protest in Barcelona. Police put the number at 80,000.

Some marchers in the city smashed windows and set rubbish bins alight. Police fired tear gas and shot rubber bullets at the ground, TV pictures showed.

In the capital, Madrid, unions said around 900,000 people took part. The government did not give a figure.
'Not yielding'

Our correspondent says the size of the demonstrations on Thursday were an indication that many are losing patience with austerity.

Unemployment in Spain is currently the highest in the EU at 24%. Nearly half of Spain's under 25s are out of work.

The general strike was the government's first big challenge since Mariano Rajoy took office after elections last November.

Despite the opposition, the government says it is committed to reining in its spending.

"The question here is not whether the strike is honoured by many or few, but rather whether we get out of the crisis," Montoro said.

"That is what is at stake, and the government is not going to yield."

Tags: Business, World, Mariano Rajoy

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