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Spain to implement austerity plan 'whatever the cost': PM

world Updated: Apr 12, 2010 17:05 IST

AFP
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Spain's socialist government will implement unpopular austerity measures to cut the burgeoning public deficit "whatever the cost," the country's prime minister said in an interview published on Monday.

Jose Luis Rodriguez Zapatero told Britain's Financial Times that even tougher measures may also be necessary.

"We have a plan - a credible, quantified plan - which we have already begun to implement," he said.

"Let's wait and see how we end 2010 and where we are on the budget and whether we are meeting our targets and, of course, if we have to make more cuts or demand more austerity, then we will do so."

The government in January announced a plan to save 50 billion euros (67 billion dollars) over three years to slash its massive public deficit from an estimated 11.4 per cent of gross domestic product (GDP) in 2009 to within the eurozone's 3.0-per cent limit by 2013.

The plan includes cuts in government spending, a virtual freeze in the hiring of civil servants and some tax rises.

But many analysts have expressed doubts over the government's deficit targets, arguing they are based on overly optimistic growth forecasts.

"What we have to be judged on in the future is whether we gradually do implement all the different items included in that plan," Zapatero said. "We will certainly do so, whatever the cost."

The Spanish economy, Europe's fifth largest, has been mired in its worst recession in decades since the global financial crisis hastened the collapse of its once-buoyant property sector at the end of 2008.

The recession sent the unemployment rate soaring to nearly 19 per cent in the fourth quarter of 2009, nearly twice the 10 per cent rate of the entire 16-nation euro zone.

Investors worry that Spain could follow in the shaky footsteps of Greece, whose debt crisis has shaken the euro and put a spotlight on the public finances of other so-called periphery members of the eurozone.

But Zapatero pointed out that Spain was in a relatively strong position as it entered the crisis with a low level of government debt.

"Even in good times there were others who had deficits and we at the time were able to obtain surpluses and reduce debt down to 30 per cent of GDP which has given us leeway now," he told the Financial Times.

Spain posted a public surplus of 2.2 per cent as recently as 2007.

But the country then underwent one of the most dramatic reversals in Europe in its public accounts as the government boosted spending to tackle the downturn.