Spain’s Opposition Slams 65 Bln Euro Budget Cut

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Spain’s opposition parties lashed out at a new 65 billion euro austerity plan proposed by Prime Minister Mariano Rajoy's government on Wednesday.

Spain’s opposition parties lashed out at a new 65 billion euro austerity plan proposed by Prime Minister Mariano Rajoy's government on Wednesday.

The new austerity plan intends to cut the budget deficit by 65 billion euros by raising value added tax from the current 18 percent to 21 percent, and the VAT reduced rate on some goods to 10 percent from the current 8 percent.

The government also intends to push through administrative reform to cut local administration staff by 30 percent and reduce the number of state enterprises. The new austerity plan envisages cutting public sector wages by 7 percent and unemployment benefits by 10 percent.

The plan is the fourth austerity package in seven months.

Spanish Socialist Party leader Alfredo Rubalcaba told parliament on Wednesday Rajoy’s new spending cuts were an attempt by the authorities to solve economic difficulties at the expense of the poor.

United Left leader Cayo Lara called the new austerity plan “a match that could kindle a bonfire in the streets.”

Eurozone countries reached a preliminary agreement early on Tuesday on the terms of a bailout for Spain’s distressed banks, indicating that the first tranche worth 30 billion euros could be issued by the end of July.

Eurozone ministers agreed in June to loan Spain up to 100 billion euros to assist the country in restructuring its troubled banking sector.

The bailout for Spanish banks makes it the fourth country, after Greece, Ireland, and Portugal, to receive financial assistance since Europe's debt crisis began.

Spain reported a deficit in 2011 equal to 8.5 percent of GDP compared with the EU annual limit of 3 percent, and a debt of 68.5 percent of GDP .

 

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