Spain: tightening the screws

Spain is set to unveil its budget for 2012 on Friday, and the purse strings will be tight. In an effort to keep in line with agreements made with the European Union to get the nation's deficit under control, Madrid is expected to slash at least 35 billion euros ($46.7 billion) from public spending.

That would bring down the country's debt as a percentage of gross domestic product (GDP) to 5.3 percent, a figure put forth by the EU, to avoid being forced to accept an international bailout.

The EU's original target was 4.4 percent, but this was relaxed slightly. Still, Spain is expected to struggle to meet even the revised figure of 5.3 percent, as its economy is expected to shrink and make even more budget slashing necessary.

As the eurozone's fourth-largest economy, should Spain require a bailout it would be much bigger than emergency funding given to Greece and Portugal as they struggled to combat similar deficit problems.

Unwelcome reform

The announcement about the budget is not likely to be received well by the public; protests took place across the country on Thursday, backing a general strike of public sector workers taking place on the same day.

Unions protested Friday's anticipated deficit-reduction reform package, which includes spending cuts, tax hikes and banking reforms.

A total of 176 protesters were arrested across the country, and 104 people, including 58 police officers, were injured in clashes.

The labor-specific measures proposed by the government are intended to ease Spain's unemployment problems and make the country more competitive. It will become easier for firms to fire employees and enable companies to implement unilateral wage cuts. Nearly a quarter of Spaniards are unemployed, the highest jobless rate in the eurozone. The figure is almost 50 percent for young people.

Despite opposition the Spanish government insists that it will not waiver in its commitment to the reform plans.

mz/dfm (AFP, Reuters)