Monday, April 2, 2012

Spain to reveal deep budget cuts in sinking economy

Spain will reveal deep budget cuts on Friday despite stiff popular resistance, increasing concerns that austerity measures demanded by the EU will only push the economy deeper into recession.

A day after a general strike disrupted transport, almost paralysed heavy industry and brought thousands of protesters into the streets, the conservative government must say how it can meet deficit targets that many believe it will struggle to achieve.

Prime Minister Mariano Rajoy cannot afford to upset nervous bond markets that pushed the premium for Spanish 10-year debt on Thursday close to their highest levels since early January.

Markets fear the government, which took power at the end of last year, will fail to deliver the budget cuts even though the European Union has softened the deficit targets.

Brussels has agreed to let Rajoy aim for a 2012 deficit equal to 5.3 percent of gross domestic product, a less-demanding goal than the original 4.4 percent but still a huge step from 8.5 percent last year. Read More