Spain unveils $79 bln budget cut

Spain unveils $79 bln budget cut

MADRID - The Associated Press
Spain unveils $79 bln budget cut

Thousands of people take part in the ‘Coal March’ acclaiming coal miners from northern Spain as they rally outside Puerta del Sol in Madrid, Spain only hours before the announcement of the country’s major austerity plan. The labor action continued yesterday. EPA photo

Spain’s government heaped further austerity measures on the country yesterday as it unveiled sales tax hikes and spending cuts aimed at shaving 65 billion euros ($79.85 billion) off the state budget over the next two and a half years.

A day after winning European Union approval for a huge bank bailout and breathing space on its deficit program, Prime Minister Mariano Rajoy warned Parliament that Spain’s future was at stake as it grapples with recession, a bloated deficit, investor wariness of its sovereign debt.

“We are living in a crucial moment which will determine our future and that of our families, that of our youth, of our welfare state,” said Rajoy.

“This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice.”

Yesterday’s increases in sales tax include a 3 percentage point hike on products and services like clothing, cars, cigarettes and telephone services to 21 percent and a 2 percentage point increase on goods such as public transport fares, processed foods and bar and hotel services to 10 percent. The sales tax on basic goods like bread, medicine and books stays at 4 percent.

The increases were widely expected but go against campaign pledges made by Rajoy before he was elected in November and since he came to power. As Rajoy announced the new austerity measures, hundreds of coal miners marched through the centre of Madrid to protest against a previous 60 percent cut in coal subsidies that they say will shut down mines and put them out of work.

400 km walk

The miners, who had walked some 400 kilometers from the Asturias region over 44 days, were joined by thousands of supporters, including labour activists, on Wednesday after receiving a hero’s welcome in the capital on July 10 night as they marched in with lamps lit on their helmets.

Public anger over spending cuts has risen as school and hospital budgets have been hit.

 “Without the mines we don’t have anything, absolutely nothing in our region,” said one of the miners in the protest, Albano Gonsalvez.

With nearly one quarter of the workforce and more than half of young Spaniards without a job, the government said unemployment benefit would fall to 50 percent of previous earnings from 60 percent after the first six months on the dole.

Rajoy said the measure was intended to increase the incentive to look for work.