MADRID — Spain's government was set to approve on Friday a fresh round of austerity and reform measures aimed at easing market fears the country will need a bailout to manage its debt, a possibility the finance minister ruled out.
The new moves include plans to sell off a 30 percent stake in the government-owned national lottery, partial privatization of airports, the elimination of a key jobless benefit and tax cuts for small businesses.
Spanish media reported that the administration of Prime Minister Jose Luis Rodriguez Zapatero, who canceled a trip to an Iberoamerican summit in Argentina to see the reforms through, may also boost taxes on cigarettes during a final announcement detailing the measures Friday afternoon.
Finance Minister Elena Salgado insisted in an interview with Britain's BBC Radio 4 that fears Spain, the eurozone's fourth largest economy, could need a bailout are overblown.
"We are doing all that we had committed to do, our fiscal adjustment is on track," Salgado said. "We have done all the things that we have to do with our financial sector. It is in a strong restructuring process."
The latest measures, first announced Wednesday by Zapatero, were welcomed by both markets and the European Union after weeks of speculation that first neighboring Portugal and then Spain would need financial help.
In May, when markets were spooked by the near-bankruptcy of Greece, Spain cut wages for civil servants, froze most retirement pensions, and made it easier and cheaper for companies to lay people off.
Zapatero has also pledged to reform the pension system early in 2011, likely raising the retirement age from 65 to 67, an unpopular move that sparked a general strike in late September.
In the latest measures, the government hopes to take in €9 billion ($12 billion) by selling a 49 percent stake in Spain's airports in a deal that would also shift management of Madrid's Barajas and Barcelona's El Prat airports to the private sector.
Selling the lottery stake would give Spain as much as €5 billion. The lottery, famed for its Dec. 22 "El Gordo" (The Fat One) brings some €3 billion into the state's coffers annually.
Meanwhile, some 40,000 small and medium-size companies are expected to benefit from the tax cut. The measures also include a reduction in costs and bureaucracy for people setting up new companies.
A special subsidy of €426 for people whose unemployment benefits have run out will be axed in February. The measure was introduced in 2009 as the crisis began to hit Spain.
Zapatero's announcement helped ease jitters that hit markets in recent weeks and sent government borrowing costs soaring in both Spain and Portugal.
The countries' borrowing costs continued to fall Friday, a day after the European Central Bank said it would keep helping the continent's banks and amid speculation it may also be quietly buying the bonds of debt-burdened eurozone countries to ease their borrowing costs.
The yield on Portuguese 10-year bonds fell below 6 percent for the first time in three months on Friday, while Spanish yields slipped back below 5 percent after reaching 5.7 percent days earlier. Germany's 10-year bonds, a benchmark of global lending safety, stood at 2.8 percent.
Spanish and Portuguese stocks continued to recover on Friday for the third consecutive day, reversing severe losses last week. Spain's benchmark index was up 0.5 percent in late morning trading, while Portugal's was 0.9 percent higher.
But while markets have welcomed the measures, Spanish labor unions have severely criticized them and have already begun threatening strikes at Spain's airports and among lottery vendors over the Christmas period.
In less than three years, Spain has tumbled from being Europe's top job creator to having a eurozone high unemployment rate of nearly 20 percent, with just under 5 million people out of work.
The country is limping out of nearly two years of recession triggered buy a collapse in its real estate sector during the international financial crisis. Its top task now is to slash a deficit from 11.2 percent of GDP in 2009 to within the EU limit of 3 percent by 2013.
Barry Hatton in Lisbon contributed to this report.
- Sentenced but never jailed, robber who went...
- Dress codes: Where should schools set limits?
- Utah, Oklahoma same-sex marriage cases on...
- Dinosaur discoveries in Utah's 'amazing...
- 283 missing, 4 dead in South Korea ferry...
- Obama: Religious intolerance has ‘no...
- Delta tops list of most profitable airlines...
- 'Captain Underpants' tops list of last year's...
- Obama: Religious intolerance has... 76
- The dangers of financially illiterate... 30
- Bureau of Land Management to pursue... 22
- Report projects health law's subsidies... 21
- Bible's U.S. popularity steady, but... 18
- 'Obamacare' under attack as... 14
- Utah, Oklahoma same-sex marriage cases... 14
- Kathleen Sebelius: Health care launch... 10