Spain debt rises on aid to banks, regions, finance cost

Sat Sep 29, 2012 4:24pm EDT
 
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By Andrés González

MADRID (Reuters) - Spain's debt levels are set to rise next year, piling pressure on the government to apply for aid as it pours funds in to cash-strapped regions, an ailing banking system and rising refinancing costs, its budget showed on Saturday.

Spain's debt as a ratio of gross domestic product will reach 90.5 percent by end 2013, according to the document presented to parliament for approval, almost three times that registered before the property bubble burst in 2008.

The budget aims to make savings of around 13 billion euros ($16.7 billion) next year, largely by deepening already unpopular cuts in public sector wages, education, health and social services, fuelling anti-austerity protests.

"This is an austerity budget, but will serve to help us get over this long economic crisis and once again show that Spain is a trustworthy partner within Europe," Treasury Minister Cristobal Montoro told journalists after delivering the budget.

Spain is at the center of the euro zone debt crisis as nervous investors demand ever higher premiums to hold Spanish debt on concerns the government cannot control its finances in the midst of a deepening recession.

Calls by wealthy northeastern region Catalonia for independence and the rising number of demonstrations on the streets of major cities have stoked doubts Spain can fix its problems without help.

Thousands of protesters gathered on Saturday in Madrid's Neptune plaza, between the Prado Museum and Parliament, for a third time this week to vent anger at politicians they accuse of pillaging the welfare state to bail out badly-run banks.

"This has to change. We have to show them we are not an anti-system minority but represent Spain's discontent and we are many. You only have to see the unemployment rate to see that," said state school teacher, Montse, 44, who was at the march with her unemployed husband and 11-year-old daughter.   Continued...

 
Spain's Treasury Minister Cristobal Montoro stands in front of a screen showing a document with a Quick Response (QR) code, representing the first draft of Spain's 2013 budget,during a ceremony at Parliament September 29, 2012. REUTERS/Sergio Perez