Madrid to slash budget 8.9 percent and impose new taxes

Madrid - Thursday, the Spanish government, hoping to make way for approval of an EU bailout and sovereign debt purchases by the European Central Bank, announced its fifth round of budget cuts and tax increases.

The reaction from Spaniards, who took to the streets of Madrid in violent protests of austerity measures as recently as Tuesday, is likely on the minds of legislators and Madrid police. Despite the new taxes and government cutbacks proposed, it is unclear if international lenders will release partial loans up to €100bn into Spain’s failing banks. Beyond bailouts, Spain’s debt and interest payments on the debt is believed to be unsustainable by most financial analysts, according to an ABC report. However financial leaders in Madrid and Brussels claim Thursday’s budget announcement was equivalent to EU recommendations issued in July, which was enough to raise European and American financial markets. Spain’s leaders are trying to hit a budget deficit reduction target of 4.5 per cent of economic output for next year that would ease concerns of international lenders, however the country is has slipped behind its goals. Last year Spanish deficits were nearly nine percent of the nation’s GDP. It remains to be seen how average Spaniards and Spanish unions will react to the 8.9 percent cutback in government spending that affects many social programs. The new package of spending cuts and tax hikes hit lottery winnings Spain’s pension reserve fund among other programs. Meanwhile, the parliament of Spain’s most economically important region, Catalonia, has approved a referendum that for economic independence from Spain. However in Madrid, the government claims its most economically important region, would be blocked from succession by a constitutional measure that would render a separatist vote irrelevant.