Spanish Reforms Slash $69 Billion, but a Gap Remains

The Spanish government's most recent reforms slash 56.4 billion euros ($69 billion) from the public in the next two and a years, an official document showed on Saturday, leaving a gap to be by taxes on energy.

Spanish Prime Minister Mariano Rajoy pledged 65 billion euros savings from tax hikes and spending on Wednesday in a painful package aimed convincing the EU and investors his government is serious reform.

The 8.6 billion euro shortfall be covered by other measures as new energy and environmental taxes, according to a document international investors posted the Economy Ministry website.

Of the 56.4 billion euros of measures laid so far, about 34.4 billion euros will come from changes tax rates and 22 billion spending cuts until 2014.

The government said it will approve a new energy tax scheme in July that force utilities and consumers to share the burden of a 25 billion euro tariff deficit energy companies.

Spain needs erase 65 billion euros from its public deficit in to reach EU debt reduction targets by 2014. It must cut its deficit of 8.9 percent of gross domestic product to 6.3 percent in 2012, 4.5 percent in 2013 and 2.8 percent the year .

But the recent reforms have provoked protests citizens tired of bearing the burden an economic crisis they blame bankers and politicians. Nearly one four is unemployed in country.

Thousands of Spaniards have gathered in cities Spain since Rajoy unveiled the measures Wednesday and more protests were expected on Sunday, Madrid police source said.

Speaking a party rally in Granada, Rajoy said the unpopular reforms necessary to put the country on a path of growth and job .

" of us like the decisions taken in the last days, but if we hadn't taken them things would be worse," Rajoy told his supporters. "This is great country and you have a government that will get us of this crisis."

Spain's two largest unions pledged widespread action in September protest the measures but stopped of saying whether the movement will be in the of a general strike. The country's public workers have already called their own strike September.

from sweeping tax reforms, including a 3 percentage point hike value-added tax (VAT) rates, servants will bear the brunt of the new austerity in the form of wage , job reductions and the elimination certain perks.

In the official publication of reforms on Saturday, the government also steps to crack down fraud by the unemployed, reserving the to cancel dole payments on evidence of wrongdoing.

Many unemployed find work in a large market the government has so struggled to fight.

Madrid also reserves the right to backtrack a pledge to compensate cutting civil servants' 2012 Christmas bonus through a 2015 pension fund contribution it is struggling to its deficit goal.

In another move to revenues, the government will eliminate a tax break for first- home buyers who purchased before January 20, 2006, the state bulletin showed.


Adapted from: CNBC, July 14, 2012.