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Violence rocks Spain's capital after austerity measures unveiled


07-12-2012 10:27 BJT

The Spanish government unveiled sixty-five billion Euros worth of public spending cuts and tax hikes on Wednesday to secure rescue funds from Brussels and prop up Spain’s battered banking sector. CCTV’s Jack Barton reports the new measures were announced as violent anti-austerity protests rocked the streets of Madrid.

Spanish coal miners angered by massive subsidy cuts took to the streets of Madrid on Wednesday.Best opening wide of action on hand… hard to tell from the list. They were joined by thousands of anti-austerity demonstrators in protests that quickly got out of hand. Police opened fire with rubber bullets.

The demonstrators fought back with whatever they had. It was among the worst violence Spain has witnessed since the Eurozone debt crisis erupted almost three years ago.

Yet even as the clashes continued more bad news arrived. Spain’s prime minister promised to raise value added tax by three percent while cutting welfare spending and the budgets of local authorities.

The tax hikes and budget cuts are necessary to secure an EU rescue deal for Spain’s troubled banks worth up to 100 billion Euros.

Spain announces further spending cuts and increases VAT 3 percent.

Spanish Prime Minister Mariano Rajoy said, “The package of fiscal consolidation including earnings and cost cuts will be of 65 billion euros in the next two and half years.”

Spain has been given an extra year to reach an annual deficit target of three percent.

But analysts warn the new austerity measures may be counter-productive.

Rabobank Senior Currency Strategist, Jane Foley, said, “More austerity will slow down the GDP and of course as long as you slow down GDP, it's more difficult to get your deficit as a percentage -- as a percentage of that GDP -- back in order.”

Spanish workers complain less welfare plus higher taxes will equal extra financial pain.

Employed Spaniard Lana said, “Everything costs more and wages go down and ends don´t meet.”

EU officials were more upbeat and the European Commission was quick to praise Madrid’s announcement.

Simon O’Connor, European Commission spokesperson for economic and monetary affairs, said, “It’s an important step to ensure the fiscal targets for this year can be met.”

It’s also an important step to securing EU aid.

EU finance ministers will meet here in Brussels at the end of next week to focus on the rescue deal for Spanish banks, and Spain’s renewed commitment to reduce its deficit is likely to ensure that bailout is signed off on allowing rescue funds to flow to Madrid by the end of this month.

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