Confronted with a deep recession, soaring inflation and mistrust among businessmen, President Daniel Ortega said slashes in government spending and privatization of state property are efforts to "save the economy."

Ortega admitted Monday the austerity measures will worsen the recession, saying, "while these measures won't cost our lives, they will cost us jobs and work."But he said the impact would be "temporary" and state workers who lose their jobs will receive food packages for two months and be offered work in the countryside.

Officials had billed Ortega's speech as a major policy statement that would re-define the role of the state in the economy, reflecting recent debate in the ruling party about a swing away from socialism and toward capitalism.