The Spanish government will approve even more deficit-reduction measures this week on top of the 15 billion euro package of tax hikes and spending cuts they announced last week. Last week Spain’s government announced the budget deficit for 2011 would be 8% of GDP. This figure was higher than the 6% previously forecasted. Now the government is saying the deficit could be even higher.
The newest deficit reduction measures will be passed on Thursday according to Treasury Minister Cristobal Montoro. No details were given on what kind of measures would be passed, but Montoro did tell reporters that these measures would show the rest of the EU that Spain is serious about acting quickly to shore up public finances.
Luis de Guindos, Spain’s Finance Minister, said once the government found out how serious the deficit number were they had no option but to raise taxes despite pledging not to during the campaign.
Spain’s government is attempting to stay ahead of their economic events by announcing these new measures and cautioning that their deficit may be higher.
“It was an act of responsibility and political initiative to keep the Spanish economy from reaching a situation that would have been practically unsustainable,” de Guindos told Cadena Ser radio.
De Guindos also said that the Spain couldn’t afford to announced a deficit two points higher than expected without also taking measures such as raising taxes. He also implied the EU would have stepped in somehow if they didn’t enact new measures, “If we had not, others would have done it for us,” said Luis de Guindos.
The sovereign debt crisis in Europe will continue to take center stage as investors all around the world wait and see if Europe can solve their problem.