Spain’s new Prime Minister Mariano Rajoy is taking tough steps to combat his country’s debt crisis, and has announced that while taxes will rise substantially, spending will be cut even more. He aims to reduce a worse-than-expected deficit by 14.9 billion euros ($19.3 billion).
Bloomberg reported that Spain’s deficit will hit 8% of GDP for 2011–twice the size of Italy’s predicted deficit and four times that of Germany–with, according to spokeswoman Soraya Saenz de Santamaria, tax increases that will total 6 billion euros and spending that will be slashed by 8.9 billion euros.
However, such tight austerity measures could ruin any chance Rajoy has to help his country’s economy grow. The unemployment rate is currently 22%, the highest in Europe, and with such severe spending cuts the likelihood that Spain can grow its economy out of trouble is negligible.