Spain
is cutting 27bn euro from its budget this year as part of one of the
toughest austerity drives in its history. The government says it will
raise 12.3bn euros this year, aided by an increase in tax for large
companies. According to Raj Badiani, an economist at IHS Global
Insight I suspect that the government could be forced to implement
further austerity measures later this year, with lingering economic
downturn set to place additional strains on an already perilous budget
deficit reduction plan
Last month Prime Minister Mariano Rajoy agreed with the European
Commission to reduce Spain's deficit from 8.5% to 5.3% of GDP in 2012. Investors
- worried about a bailout for Spain or Italy - wanted the fund to
increase from its current size of about 500bn Euros to closer to 1
trillion euros. But there was resistance from Germany to an increase of
that scale.
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