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Spain Bites the Bullet

As the euro continues to tank and European countries scramble to deal with shrinking economic forecasts, Spain has proposed slashing its spending plans by nearly 8 percent next year as it struggles to deal with financial turbulence.

Austerity measures in Spain passed Thursday by a single vote in parliament, where the possibility of cutting social services is encountering strong resistance.

Spanish unemployment remains high, at 20 percent, with no real relief expected for the next several years. –JCL

Bloomberg Businessweek:

Spain proposed reducing spending by 7.7 percent next year in a budget that the minority Socialist administration may struggle to push through parliament.

Finance Minister Elena Salgado set a spending limit of 122.3 billion euros ($151.4 billion) for 2011, when she expects the economy to grow 1.3 percent after two years of contraction, she said after a Cabinet meeting today. The 7.7 percent decline compares with the initially budgeted level for 2010, she said. Unemployment, now at 20 percent, will average 19.4 percent in 2010 and 18.9 percent next year, according to a new set of forecasts that see a weaker growth outlook for 2012 and 2013.

Prime Minister Jose Luis Rodriguez Zapatero lacks a parliamentary majority and won approval for austerity measures yesterday by a single vote as past supporters voted against a freeze on pensions and public-wage cuts. That casts doubt on the future of his government.

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