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More austerity

Spanish Treasury Minister Cristobal Montoro (right) talks next to Economy Minister Luis de Guindos during their news conference today.

MADRID – Spain has set out its austerity budget for 2013, with new spending cuts but protection for pensions, amid a shrinking economy and 25 per cent 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.

Tomorrow, results of a stress test on Spain’s banks are due to be released.

Among the key points presented were:

* a 12 per cent average cut in ministerial spending

*a freeze in public sector pay for the third consecutive year

* a new independent authority to monitor government finances

*an increase in pensions funded by drawing on 3bn euros of reserves

*a new 20 per cent tax on lottery wins above 2,500 euros (2,000; $3,200)

*a new car scrappage scheme

Saenz de Santamaria said that efforts to close the government’s deficit would focus more on spending cuts than tax rises.

The only areas of spending to increase in 2013 would be pensions, student scholarships and interest payments.

Individual pension payments would increase by one per cent next year, the government said, while the overall pension budget would rise by four per cent.

Spending cuts would reduce the deficit by 0.77 per cent of GDP in 2013, while revenue adjustments would yield 0.56 per cent. (CNN)

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