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Saturday 15th of May 2010
May 12, 2010    

Spain set to reveal massive budget cuts

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by Kay Murchie
Spain set to reveal massive budget cuts

Spanish Prime Minister, Jose Luis Rodriguez Zapatero, is set to unveil massive budget cuts later as fears mount that the debt crisis in Greece may spread to Spain.

The country’s deficit is currently 11% of GDP and Spain plans to reduce it by 4.7% by the end of next year.

There have been fears that the Greek debt crisis would spread to other euro zone nations and this has sent shares across the world plummeting and the euro under pressure.

According to reports, the EU is keen to see weaker European economies such as Spain, Portugal and Greece to introduce tougher austerity measures.

Spain is expected to announce big spending cuts, a hike in taxes and a freeze on recruitment in the public sector.

However, tough austerity measures in Greece resulted in workers staging strikes across the country, which led to three deaths in Athens last week after protesters set fire to a bank.

In the meantime, last week it emerged that the Spanish economy had finally emerged from recession after experiencing growth of just 0.1% in the first quarter of 2010, ending a run of seven consecutive quarters of contraction.

However, there will undoubtedly be fears over the recovery since the latest figures show unemployment tipped over the 20% mark - one of the highest rates of unemployment within the 16-member euro zone.

Spain’s jobless rate is double the 10% for the euro zone as a whole with the total number of jobless in the country at 4.61 million.

The economy has been hit by a severe slump within its key construction industry, which has led to a significant amount of job losses.

Standard & Poor’s (S&P) recently downgraded Spain’s credit rating by one notch to AA from AA+ over fears for the country’s economic outlook.

The Spanish economy, which is the euro zone’s fourth largest, contracted by 3.6% in 2009.

According to the European Commission, the economy will contract by 0.4% this year.

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