Spain to pass reforms, budget cuts with eye on aid

Thu Sep 27, 2012 7:38am EDT
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By Paul Day

MADRID (Reuters) - Spain was set to announce economic reforms and a tight 2013 budget on Thursday, aiming to avoid the political humiliation of having Brussels impose conditions on any request for an international bailout.

Some ministries could see their budgets slashed by up to 40 percent, Spanish media said, as Prime Minister Mariano Rajoy's battle to reduce one of the euro zone's biggest deficits is made still harder by falling tax revenues in a recession.

"We know what we have to do, and since we know it, we're doing it," Rajoy said on Wednesday as street protests in Madrid and secession talk by the northeastern Catalania region compounded his government's problems.

"We also know this entails a lot of sacrifices distributed... evenly throughout Spanish society," he said while visiting New York to attend the U.N. General Assembly.

Details are to be announced at a news conference starting at around 3 p.m. (1300 GMT) following a cabinet meeting.

Thousands of anti-austerity demonstrators demanding that Rajoy resign gathered for a second night on Wednesday near the parliament building, which was guarded by hundreds of police. Protests on Wednesday were peaceful after a march on Tuesday ended in clashes with police.

"The only way we can achieve anything is to be here every day," said demonstrator Adelaida Olivares, who is unemployed.

Rajoy's image has deteriorated rapidly since his party won an absolute parliamentary majority last November.   Continued...

Spain's Prime Minister Mariano Rajoy arrives to speak at the Council of the Americas in New York September 26, 2012. REUTERS/Carlo Allegri