More austerity pain for Spain with fresh cuts ahead

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More austerity pain for Spain with fresh cuts ahead

More austerity pain for Spain with fresh cuts ahead
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For Mariano Rajoy, it was payback time.

He has got a banking bailout and an extra year to hit Spain’s deficit reduction targets. Now its European partners want to see Madrid is making more of an effort.

But the new austerity package unveiled in parliament on Wednesday went even further than many expected. The aim is to cut the public budget by 65 billion euros by 2014.

Conservative Prime Minister Rajoy said the latest measures were unpleasant but unavoidable.

“This situation is extraordinarily serious and we have to act urgently,” he told MPs, after announcing steps such as a three per cent rise in VAT sales tax.

Rajoy’s party colleagues showed their support for moves such as cuts in unemployment benefit and civil service pay and perks. But there were jeers from the Socialist opposition which fears deeper austerity will only make matters worse.

“The problem is the consequences and these are depression, unemployement and lack of trust in our country,” said Socialist leader Alfredo Pérez Rubalcaba.

There will also be reforms to local authorities, shutdowns of public companies and budget cuts for political parties and trade unions.

For recession-hit Spain, it is yet another bitter pill to swallow.