Spain braced for more misery as Madrid unveils 2013 budget

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Spain braced for more misery as Madrid unveils 2013 budget

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A budget to get the country out of a crisis – that is how Madrid is describing a new swathe of austerity measures for Spain for 2013. It includes tax hikes – even on lottery winnings – and deep spending cuts.

For Treasury Minister Cristóbal Montoro, the biggest black hole is the 10 billion euros of interest the country pays on its national debt. “What couldn’t we do with that money?” he asked. “That’s why it is so important to cut the deficit.”

Public sector wages are to be frozen and departmental budgets slashed to try to balance the books of the euro zone’s fourth biggest economy.

And Deputy Prime Minister Soraya Saenz de Santamaria explained an independent body would oversee the budget, anticipating any slippage and ensuring transparency at all times. The aim is to convince the international community these reforms will be implemented.

In one of the few measures likely to meet with public approval, the government has announced a one percent increase in pensions for 2013, adding it is planning a complete overhaul of the pensions system, including restricting early retirement.

According to analyst Juan Pedro Zamora from XTB Brokers, the ruling People’s Party is doing the only thing it can faced with a high deficit and lack of solvency needed to make more immediate payments to some international creditors – and that is reducing spending.

Brussels has praised the 43 reforms as “ambitious” and “targeted”. But they may not be enough to stave off the need for an international bailout, or to appease the public which has been on the streets demanding the government resign.