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| Spain budget to impose further austerity measures | |
| (about 9 hours later) | |
| Spain is due to set out its austerity budget for 2013 later, against a backdrop of a deteriorating economy and 25% unemployment rate. | |
| Madrid is expected to outline 39bn euros ($50bn; £31bn) worth of savings, tax rises, and structural reforms. | |
| It comes amid further protests this week, and growing expectations that Spain will seek a bailout from its eurozone partners. | It comes amid further protests this week, and growing expectations that Spain will seek a bailout from its eurozone partners. |
| On Friday, results of a stress test on Spain's banks are due to be released. | On Friday, results of a stress test on Spain's banks are due to be released. |
| Spain's borrowing costs rose back to danger levels on Wednesday and the stock market fell. | Spain's borrowing costs rose back to danger levels on Wednesday and the stock market fell. |
| The BBC's Tom Burridge, in Madrid, says that it seems investors are losing patience. | |
| Spain will hope that Thursday's austerity measures will mean fewer economic conditions if, or more likely when, it asks for a second bailout. | |
| 'Significant' fall | |
| Prime Minister Mariano Rajoy fuelled expectations that Spain would ask for a bailout when he told the Wall Street Journal on Wednesday that if borrowing costs were "too high for too long", then "I can assure you 100% that I would ask for this bailout". | Prime Minister Mariano Rajoy fuelled expectations that Spain would ask for a bailout when he told the Wall Street Journal on Wednesday that if borrowing costs were "too high for too long", then "I can assure you 100% that I would ask for this bailout". |
| The economic situation remains grim, with figures from the central bank on Wednesday showing the country's recession deepened as economic output fell. | The economic situation remains grim, with figures from the central bank on Wednesday showing the country's recession deepened as economic output fell. |
| "Available data for the third quarter of the year suggest output continued to fall at a significant pace, in an environment in which financial tension remained at very high levels," the Bank of Spain said in a monthly report. | "Available data for the third quarter of the year suggest output continued to fall at a significant pace, in an environment in which financial tension remained at very high levels," the Bank of Spain said in a monthly report. |
| The Madrid stock exchange closed 4% down on Wednesday, and the interest rate on Spanish 10-year sovereign debt rose above 6%. | The Madrid stock exchange closed 4% down on Wednesday, and the interest rate on Spanish 10-year sovereign debt rose above 6%. |
| Last week, Spain's second biggest bank, BBVA, estimated that up to another 60bn euros (£48bn; $78bn) will be needed to bail out the sector. | Last week, Spain's second biggest bank, BBVA, estimated that up to another 60bn euros (£48bn; $78bn) will be needed to bail out the sector. |
| About 20bn euros has already been allocated to troubled banks. | About 20bn euros has already been allocated to troubled banks. |
| Spain, the eurozone's fourth largest economy, fell back into recession in the last quarter of 2011, the second recession since the bursting of the country's property bubble. | Spain, the eurozone's fourth largest economy, fell back into recession in the last quarter of 2011, the second recession since the bursting of the country's property bubble. |
| But with a shrinking economy and unrest in the country, reducing the deficit via further austerity measures may prove a difficult task for the government. | But with a shrinking economy and unrest in the country, reducing the deficit via further austerity measures may prove a difficult task for the government. |
| The government has predicted a budget deficit this year of about 6.3%, but many analysts estimate it will be nearer 7% or higher. | The government has predicted a budget deficit this year of about 6.3%, but many analysts estimate it will be nearer 7% or higher. |
| The basic outline for the budget has been known since July, but not exactly where the cuts and savings will come from. | The basic outline for the budget has been known since July, but not exactly where the cuts and savings will come from. |
| 'Not credible' | 'Not credible' |
| There has been speculation that the budget could include such measures as taxes on shares transactions, "green taxes" on emissions or eliminating tax breaks, and even possibly ending inflation-linked pensions. | |
| Madrid has already said that it wants to claw back a total of more than 150bn euros between 2012 and 2014: 62bn euros this year, 39bn euros in 2013, and 50bn euros in 2014. | Madrid has already said that it wants to claw back a total of more than 150bn euros between 2012 and 2014: 62bn euros this year, 39bn euros in 2013, and 50bn euros in 2014. |
| But many analysts remain sceptical that this will be enough to resolve Spain's economic woes. | |
| Sony Kapoor, managing director of the think-tank Re-Define, told the BBC: "I'm afraid we're going to get a budget which is credible neither for the markets, nor for the European partners. | Sony Kapoor, managing director of the think-tank Re-Define, told the BBC: "I'm afraid we're going to get a budget which is credible neither for the markets, nor for the European partners. |
| "It's going to try and meet too many objectives all at the same time, serve too many masters, and end up not serving any of them." | "It's going to try and meet too many objectives all at the same time, serve too many masters, and end up not serving any of them." |
| The prospect of further cuts sparked off another wave of demonstrations, and more speculation about the secession of the wealthy Catalonia region. | |
| Despite the public anger, Mr Rajoy said sacrifices were necessary. | Despite the public anger, Mr Rajoy said sacrifices were necessary. |
| "We know what we have to do, and since we know it, we're doing it," he said in a speech in New York. | "We know what we have to do, and since we know it, we're doing it," he said in a speech in New York. |
| "We also know this entails a lot of sacrifices distributed... evenly throughout the Spanish society," he said. | "We also know this entails a lot of sacrifices distributed... evenly throughout the Spanish society," he said. |
| But Boris Schlossberg, managing director at New York-based BK Asset, said: "Spain is in a vicious cycle, because austerity is hurting economic activity and revenues, which causes greater fiscal gaps. | But Boris Schlossberg, managing director at New York-based BK Asset, said: "Spain is in a vicious cycle, because austerity is hurting economic activity and revenues, which causes greater fiscal gaps. |
| "People are starting to realise this, and the political will to absorb these sacrifices is diminishing by the hour," he said. | "People are starting to realise this, and the political will to absorb these sacrifices is diminishing by the hour," he said. |
| Are you in Spain? How are you coping with the economic situation? Are you unemployed? Please get in touch with us using the form below. | Are you in Spain? How are you coping with the economic situation? Are you unemployed? Please get in touch with us using the form below. |