Spain braces for 3rd austerity round amid hemorrhaging tax receipts

Spanish Prime Minister Mariano Rajoy may unveil a third austerity round within days as his six-month- old government tries to avoid a second bailout amid hemorrhaging tax receipts. Rajoy said on July 2 the time has come to “press the accelerator pedal” as he tries to tame bond yields. Government officials have said they are considering raising taxes on gas and products that have a reduced rate, such as food, hotels and restaurants.

Rajoy plans to announce an overhaul of public administration this week, Maria Dolores de Cospedal, his deputy in the ruling People’s Party, said today. Spain’s return to recession is undermining efforts to cut the euro area’s third-largest budget deficit as tax receipts shrivel. Ten-year bond yields climbed back above 7 percent today as European finance ministers meet to discuss the worsening debt crisis. Spain became the fourth euro-region country to seek a bailout in June to shore up banks burdened with bad loans.

“The commission will make its proposal for a new path of fiscal adjustment” for Spain at a meeting of euro-area finance ministers tonight, Economy Minister Luis de Guindos told reporters in Brussels. “We will analyze its implications and explain the measures we are taking and that we will take.” Read more >>