Spain will not abandon its 2012 public deficit target of 5.3 percent of gross domestic product, Prime Minister Mariano Rajoy said Monday, calling it absolutely indispensable.
"Reducing the public deficit to 5.3 percent this year is absolutely indispensable, a goal which we will not renounce," he said during a meeting of his conservative Popular Party.
Rajoy's cabinet on Friday approved its budget for 2012 which includes 27 billion euros ($36 billion) worth of spending cuts and tax hikes, making it the toughest spending plan since Spain returned to democracy following the death of dictator General Francisco Franco in 1975.
Government ministries will see their budgets slashed by an average of around 17 percent according to the draft budget, which also raises taxes on tobacco sales and closes tax loopholes and rebates for large companies.
Public workers will have their wages frozen, but pensions and jobless benefits were spared amid rising public anger at the dire economic situation where unemployment has soared to over 23 percent.
Spain -- which overshot its public deficit target last year -- is racing to slash it to reassure markets that it will not follow Greece, Ireland and Portugal in requesting an international bailout.
The country posted a public deficit -- the broad shortfall between spending and revenues -- of 8.51 percent of gross domestic product in 2011, far above the target for the year of 6.0 percent.
The European Union has agreed to let Spain aim for a public deficit equal to 5.3 percent of gross domestic output this year, a less-demanding goal than the original 4.4 percent agreed by the previous Socialist government with Brussels.
"Spain is going to be in the place that it deserves, it is going to once again be a country that meets its targets," said Rajoy, in power since December following a landslide general election win.
"The task we have before us is gigantic and the goal is to create jobs. But we know what we are doing. I am not in a position to give the Spanish people good news but I will be. We are sowing the seeds of a recovery."
The latest austerity measures come on top of 8.9 billion euros in spending cuts and 6.3 billion euros in tax increases already announced this year.
But meeting the deficit target is complicated by the fact that Spain is heading back into recession, with the government predicting the economy will contract by 1.7 percent this year.