Massive Protests as Spain Announces New Austerity Moves

Mariano Rajoy Announces Billions in Austerity
Measures for Spain

    Spanish prime minister makes spectacular U-
    turn to comply with EU bailout terms

[Video:
http://www.guardian.co.uk/world/video/2012/jul/11/spanish-coal-miners-video]

[Video:
http://news.linktv.org/videos/behind-the-masks-spanish-miners-battle-police-over-austerity]

[Miners arrive in Madrid Photo:
http://sphotos.xx.fbcdn.net/hphotos-ash4/417396_10151113067161159_1038573490_n.jpg

By Giles Tremlett 
Guardian (UK) July 11, 1012

http://www.guardian.co.uk/business/2012/jul/11/mariano-rajoy-spain-65bn-cuts

    Spain's prime minister Mariano Rajoy
    announces a _65bn austerity package.
  
Spanish prime minister Mariano Rajoy on
Wednesday announced sweeping cuts and tax
increases totalling _65bn (#51bn) in austerity
measures that opposition politicians warned would
sink Spain further into recession.

In a spectacular U-turn, Rajoy raised sales tax by
three percentage points, contradicting his
government's insistence that this would damage
consumer spending, strangle growth and punish the
poor.

He also cut unemployment payments, pledged to
bring forward a move to retirement at 68 years old
and reduced civil service pay. Promised changes to
energy laws looked likely to increase electricity
tariffs.

The measures came the day after a leaked
memorandum of agreement between eurozone
countries and Spain revealed strict conditions for a
banking bailout of up to _100bn.

That memorandum insisted that Spain comply with
the recommendations made by Brussels to cut a
deficit that reached 8.9% of GDP last year.

Those recommendations included the sales tax rise,
pension changes and the only stimulus element
included in Rajoy's measures - reduction of social
security contributions over the next two years.

It remained unclear exactly how much money
Spanish savers who invested billions of euros in
preference shares issued by savings banks will lose
as a result of the bailout agreement. The
memorandum insisted that they shoulder
considerable losses.

The measures came as Spain struggles with a
double-dip recession, 24% unemployment and
ailing banks that need external aid to survive.

Rajoy, who came to power pledging tax cuts,
admitted he did not like the measures.

"These measures are not pleasant, but they are
necessary," he told parliament. "Our public
spending exceeds our income by tens of billions of
euros.

"We have to get out of this hole and we have to do it
as soon as possible," he said, pointing to borrowing
costs that have reached an unsustainable level of
7%. "There is no choice."

He was applauded by his own deputies, who have
held an absolute majority in parliament since a
general election in November.

Opposition politicians reminded him that he and his
ministers had previously warned that a sales tax
hike would damage consumer spending and do
further damage to the economy.

The measures were announced the day after Spain
won European Union approval for the bank bailout
and a more relaxed deficit programme, which
changes this year's deficit target from 5.3% to 6.3%
of GDP.

Other measures he announced included further cuts
in government spending, closures of state-owned
companies and the privatisation of ports, airports
and rail assets. While Rajoy spoke, thousands of
coal miners marched on the industry ministry in
Madrid to protest against a 63% cut in subsidies to
mining companies.

Some had walked 18 days from northern and
eastern mining regions and were received as heroes
in Puerta del Sol, one of Madrid's main plazas.

A bailout memorandum will be signed on 20 July.

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