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Spanish government announces 27 bln euro budget cuts

(Xinhua)

08:49, March 31, 2012

MADRID, March 30 (Xinhua) -- The Spanish government led by Mariano Rajoy on Friday announced a 27 billion euro (around 36 billion U.S. dollars) budget cuts for this year, as it stepped up efforts to contain the country's economic woes.

It is the largest fiscal adjustment in Spain's history and Deputy Prime Minister Soraya Sanez de Santamaria told the press it was aimed at reducing the public deficit from 8.51 percent to 5.3 percent by the end of 2012.

Saenz de Santamaria said the measures were needed because Spain was "on the limit."

Among the measures are across the board spending cuts for Spain's government ministries, which will see their budgets reduced by an average of 16.9 percent.

Among areas facing cutbacks are defense spending, infrastructure investment, education scholarships, aid for immigrants and housing subsidies as well as foreign development aid.

The government has also approved new rises in company tax, after increasing income tax in December, but has not raised sales tax, which currently stands at 8 percent in Spain.

Saenz de Santamaria also announced the introduction of 'co-payment' for court cases such as civil and administrative cases and appeals. The idea, she explained, was to avoid an abuse of the justice system.

Electricity prices will rise by 7 percent, gas by 5 percent and butane by 2.9 percent, while the wages of civil servants will remain frozen for a further year.

The budget was announced less than 24 hours after the end of Thursday's general strike, which was called in protest against the government's labor reforms and spending cuts.

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