Spain to study new ECB measures, sees €102 bn savings
Tip News - 2012/08/03       A+ A-

Spain will study new measures being planned by the European Central Bank to ease the eurozone debt crisis before deciding whether to use them, Prime Minister Mariano Rajoy said Friday.

"I want to know what these measures are to see if they are adequate. Then I will take the best decision for the general interest of the Spanish people," Rajoy told a rare news conference.

"I have not yet made any decision. We still don't know exactly what is being planned. We can't act irresponsibly," he said, of what would be a momentous decision for both Spain and the whole eurozone project.

ECB head Mario Draghi said Thursday the central bank could intervene directly in the bond markets -- and for as long as needed -- so as to bring down eurozone borrowing costs but this was contingent on government support and subject to conditions.

Draghi also said the ECB might consider additional measures to calm markets which have driven borrowing costs for Italy and Spain back near to levels that forced Greece, Ireland and Portugal to seek massive bailouts.

In June, Spain secured a 100 billion euro ($123 billion) credit line from the European Union for its stricken banking sector but investors fear that with its borrowing costs rising, it may in the end need a full bailout.

Rajoy defended his conservative government's record, recalling that it has reformed the country's strict labour laws, liberalised the transport sector and restructured the financial sector since taking office in December.

He recognised that Spain had depended too much on borrowings in the past and now had to pay the price in higher interest rates, noting that Draghi's plan to intervene on the bond markets was "an important change."

Separately, the government said it planned savings of 102 billion euros ($125 billion) by 2014 as it stepped up efforts to balance the strained public finances and bring them back into line with EU norms.

The savings include 65 billion euros of tax hikes and spending cuts contained in a July austerity package, with 35 billion euros to come from a hike in sales taxes while the public sector, the regions, health and education will all be affected.

In July, Brussels gave Spain an extra year to 2014 to balance its books, saying it must bring down the public deficit -- the shortfall between spending and revenues -- to 6.3 percent of gross domestic product this year from 8.9 percent in 2011, when it badly missed its 6.0 percent target.

For 2013, the deficit target is 4.5 percent and then 2.8 percent in 2014, taking it back below the EU limit of 3.0 percent.

In Brussels, the European Commission said it welcomed the "adoption of Spain's multi-annual budget plan.... We expect the plan to fully underpin (the) targets."

Rajoy conceded that the cutbacks needed to meet the targets "are not nice measures, these are not popular measures. We do not promise miracles. It is a huge task but not an impossible task.

"You may not be in agreement with some of the measures but nobody can say that the government has not made decisions," he added.

Despite market pressure to reduce spending further, Rajoy said he had "no intention to lower pensions next year," based on current data.

With one in four people out of work in Spain, growing numbers of people have come to rely on the pension payments of parents or grandparents to survive.

The prime minister said the government had also not yet decided whether it will extend a monthly payment of around 400 euros to the long-term unemployed which is due to expire on August 15.

The measure was introduced by Rajoy's Socialist predecessors.

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