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Spain in Pain

in International Business

Spain in Pain

The Spanish government is due to unveil what is expected to be one of the toughest budgets in its recent history.

Newly-elected Prime Minister Mariano Rajoy has already warned the budget will be “very austere”.

On Thursday, Spanish police clashed with protesters after a general strike was held to protest against labour reforms designed to cut unemployment.

Separately, eurozone ministers have agreed the expansion of Europe’s bailout reserves.

The ministers, meeting in Copenhagen, have decided to boost the joint lending power of the “firewall” to 800bn euros.

Investors – worried about a bailout for Spain or Italy – wanted the fund to increase from its current size of about 500bn euros to closer to 1 trillion euros. But there was resistance from Germany to an increase of that scale.

Spain said its austerity budget would prove that it would not follow Greece, Ireland and Portugal in needing a bailout.

“Spain is going to stop being a problem, especially for the Spanish people but also for the European Union,” Economy Minister Luis de Guindos said as he arrived for the informal meeting in Denmark.

Bailout fears

Spain, which is suffering from the highest levels of unemployment in Europe, is under intense pressure from eurozone leaders to reduce its deficit.

Speaking on his way into Friday’s meeting of finance ministers, EU Economic and Monetary Affairs Commissioner Olli Rehn said: “Spain is in a very difficult situation, but on the other hand Spain has many strengths.

“Now it is important that Spain continues with consistency in order to impose the sustainability of its public finances.”

The BBC’s Gavin Hewitt in Brussels says the cuts are expected to be around 35bn euros ($46.5bn; £29bn), and that health and education funding are unlikely to escape.

Budget Minister Cristobal Montoro said it would be the most austere budget since Spain became a democracy.

“It needs a budgetary effort that up to now we have probably never made in our country.”

On Thursday, police clashed with demonstrators as hundreds of thousands swamped streets in Barcelona and other cities.

Unions said 800,000 people joined the protest in Barcelona. Police put the number at 80,000.

Some marchers in the city smashed windows and set rubbish bins alight. Police fired tear gas and shot rubber bullets at the ground, TV pictures showed.

In the capital, Madrid, unions said around 900,000 people took part. The government did not give a figure.

‘Not yielding’

Our correspondent says the size of the demonstrations on Thursday were an indication that many are losing patience with austerity.

Unemployment in Spain is currently the highest in the EU at 24%. Nearly half of Spain’s under 25s are out of work.

The general strike was the government’s first big challenge since Mariano Rajoy took office after elections last November.

Despite the opposition, the government says it is committed to reining in its spending.

“The question here is not whether the strike is honoured by many or few, but rather whether we get out of the crisis,” Mr Montoro said.

“That is what is at stake, and the government is not going to yield.”

SOURCE: BBC


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Spain Austerity MeasuresSpain protest

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