Spain revises up deficit and raises taxes

MADRID — Spain's new government warned Friday that the country's budget deficit will be much higher than anticipated this year, as it unveiled a first batch of austerity measures that include surprise income and property tax hikes.

After the new conservative government's second Cabinet meeting, the budget deficit for this year was revised to 8 percent of national income, up from the previous government's forecast of 6 percent.

Alongside the upward revision, which comes amid predictions that the Spanish economy will soon be back in recession, the government headed by Prime Minister Mariano Rajoy announced further measures to get a handle on its debts, including $11.5 billion in spending cuts.

"This is the beginning of the beginning," government spokeswoman Soraya Saenz de Santamaria said. She said more reforms and austerity will come in 2012.

The conservative Popular Party took power only last week after a landslide election win on Nov. 20, and its main priority is to make sure that Spain doesn't get dragged into the debt crisis mire that has already forced Greece, Ireland and Portugal into seeking financial bailouts and is now threatening much-bigger Italy.

An increase in the deficit forecast was not a total surprise, but the scale of the increase was. Many economists had predicted an increase because the economy stagnated in the third quarter. Spain's jobless rate is 21.5 percent, the highest in the euro zone.

Spain revises up deficit and raises taxes 12/30/11 [Last modified: Friday, December 30, 2011 10:07pm]

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