World stock markets and the euro advanced yesterday after Spain unveiled new spending cuts to deal with its deficit.
Addressing the Spanish parliament Prime Minister Jose Luis Rodriguez Zapatero vowed to cut public sector wages and slash investment spending. He detailed cuts totalling 15 billion euros for this year and next.
The markets responded positively with Madrid and Wall Street reflecting the raft of measures were what was needed to calm jittery investors. The cuts aim to slash Spains budget deficit to 6 percent of Gross Domestic Product .
But while stock exchanges were happy, Spain’s trade unions were not. They called the austerity measures harsh and said the poorest would be hardest hit.
The reduction in civil servant’s pay marks an about face for the government which until now had promised that such salaries would not be touched. Labour federations say they are not ruling out strike action.