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Spain budget imposes further austerity measures | Spain budget imposes further austerity measures |
(35 minutes later) | |
Spain has set out its austerity budget for 2013, with new spending cuts but protection for pensions, amid a shrinking economy and 25% unemployment. | |
Deputy Prime Minister Soraya Saenz de Santamaria called it "a crisis budget designed to exit the crisis". | |
The new programme of savings, tax rises, and structural reforms will be overseen by an new budget authority. | |
Expectations are growing that Spain will seek a financial 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. |
Among the key points presented were: | |
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Ms Saenz de Santamaria said that efforts to close the government's deficit would focus on spending cuts, which would deliver 58% of the planned savings, with tax rises providing the other 42%. | |
The only areas of spending to increase in 2013 would be pensions, student scholarships and interest payments. | The only areas of spending to increase in 2013 would be pensions, student scholarships and interest payments. |
She also said that the government would introduce 43 new laws to reform the country's economy. | She also said that the government would introduce 43 new laws to reform the country's economy. |
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, which 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, which has yet to specify how much it needs. |
Rebound | Rebound |
The Spanish stock exchange's Ibex index held steady on Thursday, ending the day down just 0.15%, having lost 3.9% the previous day. | |
Other European stock markets experienced modest rebounds of about 0.25%. | |
Spain will raise pensions but raid the pension reserve fund to help short term financing. The Spanish people may fear such a move #Spain | Spain will raise pensions but raid the pension reserve fund to help short term financing. The Spanish people may fear such a move #Spain |
51 minutes ago | |
Spanish press conference on 2013 budget predicted to start at 15.30 BST#Spain | Spanish press conference on 2013 budget predicted to start at 15.30 BST#Spain |
3 hours 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 | Italian PM Mario Monti says. he would be willing to serve again if there was no clear winner after next year's elections. #Italy |
3 hours 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 |
4 hours 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 |
5 hours ago | 5 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 fell slightly, to an implied interest rate of just under 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. |