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Spain Prime Minister Mariano Rajoy yielded to pressure from the European Union with a new austerity plan.
Spain announced new austerity measures today as part of a plan to cut 65 billion euros, or about $80 billion, from the public deficit by 2014, Reuters reported. Prime Minister Mariano Rajoy, hoping to avoid a full state bailout, yielded to European Union pressure and announced a value-added tax hike, new energy taxes and a plan to privatize ports and other transportation services.
The announcement comes a day after Spain's banks received a major bailout, MSNBC reported. But it comes at a bad time for the public. Spain is suffering from a 24 percent unemployment rate. For young people, unemployment is even higher, at 50 percent.
Rajoy also announced cuts in civil servants' Christmas bonuses and unemployment benefits.
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The measures are not going over well. As Rajoy announced the cuts, he was interrupted by howls from the opposition party, The Brisbane Times reported. Miners later marched through Madrid to protest Rajoy's decision to also slash subsidies to coal pits.
The heavy protests in Madrid have lead to violent clashes with police, leaving at least two people injured, the Guardian reported. Police have begun using rubber bullets to quell the demonstrations.
Analysts agree that the new austerity measures may not actually help the public. Particularly controversial is Rajoy's plan for a value-added tax increase to 21 percent from 18 percent, which could stifle consumer spending, the New York Times reported. Rajoy's administration had previously argued against such a hike. But the prime minister now says that the circumstances have changed and that he has few remaining options.
Rajoy admitted that the plan would probably not improve the economy.“Growing and creating jobs isn’t possible today,” Rajoy told Parliament, according to the Times. “The outlook is truly somber.”