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Spain budget to impose further austerity measures | Spain budget to impose further austerity measures |
(35 minutes later) | |
Spain is due to set out its austerity budget for 2013 later, against a backdrop of a deteriorating economy and 25% unemployment rate. | 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. | 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. |
Meanwhile Castile La Mancha has become the fifth of Spain's 17 regional governments to say that it will draw on a rescue fund set up by Madrid. | Meanwhile Castile La Mancha has become the fifth of Spain's 17 regional governments to say that it will draw on a rescue fund set up by Madrid. |
The central Spanish region said it would request 848m euros from the 18bn-euro Regional Liquidity Fund, joining Valencia, Murcia and Catalonia, who have collectively requested 3bn euros, and Andalucia who has yet to specify how much it needs. | The central Spanish region said it would request 848m euros from the 18bn-euro Regional Liquidity Fund, joining Valencia, Murcia and Catalonia, who have collectively requested 3bn euros, and Andalucia who has yet to specify how much it needs. |
Rebound | Rebound |
The Spanish stock exchange's Ibex index held steady in morning trading on Thursday, having lost 3.9% the previous day. | The Spanish stock exchange's Ibex index held steady in morning trading on Thursday, having lost 3.9% the previous day. |
Other European stock markets experienced modest rebounds of about 0.5%. | Other European stock markets experienced modest rebounds of about 0.5%. |
Gavin Hewitt @BBCGavinHewitt | |
Spanish press conference on 2013 budget predicted to start at 15.30 BST#Spain | |
33 minutes ago | |
Italian PM Mario Monti says. he would be willing to serve again if there was no clear winner after next year's elections. #Italy | |
34 minutes ago | |
No news yet re Spanish budget. Extraordinary cabinet meeting to agree measures has been going on for nearly five hours #spain | No news yet re Spanish budget. Extraordinary cabinet meeting to agree measures has been going on for nearly five hours #spain |
1 hour ago | |
Another Spanish region is applying for help from central govt. Castilla La Mancha says it needs 848 million in a bailout! #Spain | Another Spanish region is applying for help from central govt. Castilla La Mancha says it needs 848 million in a bailout! #Spain |
3 hours ago | |
Reports from Athens suggest the governing coalition has agreed on the main points of a new tough austerity package demanded by EU and IMF | Reports from Athens suggest the governing coalition has agreed on the main points of a new tough austerity package demanded by EU and IMF |
4 hours ago | |
Content from Twitter. Learn more about content from Twitter. | Content from Twitter. Learn more about content from Twitter. |
Stocks fell sharply on Wednesday, as markets were rattled by violent protests in Madrid and Athens, as well as a statement from the Spanish central bank that the country's economy had continued to shrink in the third quarter of the year. | Stocks fell sharply on Wednesday, as markets were rattled by violent protests in Madrid and Athens, as well as a statement from the Spanish central bank that the country's economy had continued to shrink in the third quarter of the year. |
However, the more optimistic sentiment was boosted on Thursday when the Greek finance minister, Yannis Stournaras, said that a "basic agreement" had been reached with lenders on the austerity measures required for the release of Greece's next tranche of bailout money. | However, the more optimistic sentiment was boosted on Thursday when the Greek finance minister, Yannis Stournaras, said that a "basic agreement" had been reached with lenders on the austerity measures required for the release of Greece's next tranche of bailout money. |
On the bond markets, the Spanish government's long-term cost of borrowing stabilised in early trading, at an implied interest rate of just over 6% for 10-year debt. | On the bond markets, the Spanish government's long-term cost of borrowing stabilised in early trading, at an implied interest rate of just over 6% for 10-year debt. |
The 10-year rate had risen by a quarter percentage point on Wednesday, as lenders' fears over the government's ability to repay its debts, or stay within the euro, resurfaced. | The 10-year rate had risen by a quarter percentage point on Wednesday, as lenders' fears over the government's ability to repay its debts, or stay within the euro, resurfaced. |
The BBC's Tom Burridge, in Madrid, says that it seems investors are losing patience. | 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 it asks for a second bailout. | Spain will hope that Thursday's austerity measures will mean fewer economic conditions if it asks for a second bailout. |
'Significant' fall | '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 comments from the central bank on Wednesday indicating that the country's recession deepened in the last three months. | The economic situation remains grim, with comments from the central bank on Wednesday indicating that the country's recession deepened in the last three months. |
"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. |
Last week, Spain's second biggest bank, BBVA, estimated that up to another 60bn euros (£48bn; $78bn) will be needed to bail out the banking 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 banking 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. | 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. | 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. | 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. |