Spain steps up more austerity amid protests

The government is due to pass its 2013 austerity budget, which includes further salary freezes for government workers.

 27 Sep 2012
 [Photo: Protesters have gathered for a second day in a row to rally against the austerity measures in the country [Reuters]]

Thousands of protesters rallied near the Spanish parliament for a second straight night on Wednesday after a rough day on the markets again raised the spectre of a full bailout and deeper economic pain.

Shouting “Government resign!” and “We are not afraid”, demonstrators faced off against riot police in the Plaza de Neptuno, the same area of Madrid where officers beat protesters and fired rubber bullets to disperse them on Tuesday night.

“I came yesterday and I’ll come every day to say no to this system,” said Angel Alcaide, a 30-year-old engineer who carried a sign reading “Resign”.

“This government is worse than the last. It protects its privileges, its luxuries, and the people just get cuts in health and education,” said 26-year-old Carmen Lopez, who lives in London, pushed abroad, she said, by the lack of jobs for young people.

But mass protests seemed the least of Prime Minister Mariano Rajoy’s problems as the prospect of an international rescue revived.

Spain’s borrowing costs crept back up to danger levels and the stock market plunged on Wednesday, as pressure from Catalonia, which called snap elections in a drive for greater independence, added to the gloom.

Austerity budget to be unveiledThe government is due to pass its 2013 austerity budget on Thursday, with 39 billion euros ($50 billion) in savings, including an anticipated third straight year of salary freezes for civil servants.

On Friday the government is due to unveil an independent audit of its stricken banks to determine how much capital is needed to reinforce them from further shocks.

The budget and audit “could potentially boost sentiment towards Spain and pave the way for a bailout deal to be agreed”, analysts at Capital Economics said in a note.

“But Spain will still be left with a number of other major problems” in meeting its fiscal targets, securing its banks and fielding pressure from Catalonia, they added.

Before deciding whether to ask for a bailout, Rajoy insists on knowing what conditions European authorities would attach, apprehensive of having economic cuts dictated to him.

But the Wall Street Journal on Wednesday quoted him as saying that if Spain’s borrowing costs were “too high for too long”, then “I can assure you 100 per cent that I would ask for this bailout.”

The economic backdrop was grim, with figures from the Bank of Spain on Wednesday showing economic output sliding fast in the third quarter.

The Madrid stock exchange fell by nearly four per cent in afternoon trade, in line with other European indexes troubled by Spain’s outlook.

The interest rate on Spanish 10-year sovereign debt rose above six per cent, a level considered unsustainable in the long term.

Mass street rallies

Protesters say the new austerity measures, on top of tens of billions in earlier cuts to lower the deficit and fix Spain’s finances, punish the poor unfairly.

They have staged mass street rallies such as Tuesday night’s, where authorities said 64 people were treated for injuries and 35 arrested. AFP reporters saw police beat protesters and fire rubber bullets to disperse them.

Rajoy played down Tuesday’s protest at a conference at the Council of the Americas on the sidelines of the UN General Assembly meeting.

“Allow me to recognise from here in New York the majority of Spaniards who did not demonstrate, who do not appear on the front pages of newspapers or open the television news shows,” Rajoy said.

“They are the immense majority of the 47 million people who live in Spain… That immense majority of Spaniards are working, those who can, and giving their best.”

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