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£51bn of savage Spanish cuts unveiled after bailout

Published 12/07/2012

Spain has announced a €65bn (£51bn) austerity package which includes tax rises and spending cuts only a day after it won approval from euro partners for a huge bailout of the country's stricken banks.

Announcing the harsh cuts, Prime Minister Mariano Rajoy warned his parliament that Spain's future was at stake as it grapples with recession, a bloated deficit and investor wariness of its sovereign debt.

"We are living in a crucial moment which will determine our future and that of our families, of our youths, of our welfare state," he said.

"This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice."

He spoke as thousands of miners, stung by a huge cut in subsidies, marched through Madrid.

The spending cuts, designed to cut €65bn of state budgets by 2015, include a wage cut for civil servants and parliament members and a new wave of closures at state-owned companies. Spain will also speed up a rise in the retirement age from 65 to 67.

The measures are in exchange for the bank bailout of up to €100bn (£79bn) granted to Spain by the other 16 countries that use the euro and extra time to cut the Spanish budget deficit.

Finance ministers approved the bailout programme at meetings in Brussels this week and as much as €30bn (£23bn) could flow to Spain's banks by the end of the month.

The country's banks are saddled with billions of euro in toxic loans and assets following the collapse of the country's real estate market.

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