Spain Plans New Round of Tough Austerity Measures

En la calle Génova, Madrid, la noche del 9 de marzo. (Photo credit: Wikipedia)

Struggling to meet euro zone financial targets, Prime Minister Mariano Rajoy of Spain introduced his latest package of tough austerity measures Wednesday, including a rise in the sales tax, reversing his previous stance. The package, Mr. Rajoy’s fourth set of budget measures in seven months, is intended to reduce the budget deficit by €65 billion, or $80 billion, over two and a half years. It follows a decision by European Union finance ministers Tuesday to relax Spain’s deficit target for this year to 6.3 percent of gross domestic product, rather than the 5.3 percent target that was set only four months ago. But the finance ministers also said they expected Madrid to continue showing progress on its deficit cutting. The new austerity plan came as Finland’s prime minister, Jyrki Katainen, issued a warning Wednesday that the euro’s predicament was as perilous as at any time in the past two years. “This situation is dangerous, very dangerous,” he said in an interview with Finland’s biggest daily, Helsingin Sanomat.
One of the main elements of the new round of Spanish austerity measures is a rise in thevalue-added tax to 21 percent from 18 percent. Mr. Rajoy’s government had previously argued against raising the tax amid concerns that it would deepen Spain’s recession by stifling consumer spending. But the latest budget data indicated that Spain needed to try generating further tax revenue if it wanted to come close to meeting its deficit pledges. ... Continue to read.

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