Spanish Prime Minister Mariano Rajoy has outlined new austerity measures in parliament - including a policy U-turn on sales tax - as miners gathered in Madrid for a mass protest against the third round of state cuts.
Spain is suffering "the second deepest recession in its history," and the slump will continue for another year according to Spanish Prime Minister Mariano Rajoy, who addressed parliament Wednesday morning.
Detailing a new round of austerity measures to balance the state budget, he said the measures had to be adopted without delay. The latest tax rises and spending cuts total 65 billion euros over the next two and a half years.
The actions include a a three-point rise in sales tax from 18 to 21 percent.
Ministers previously claimed that a sales tax hike would damage consumer spending and send the economy even further into recession. Rajoy said this policy U-turn will help Spain meet its obligations to Europe and bring down the deficit.
Public spending is to be cut by a further 3.5 billion euros through a series of measures, including scrapping Christmas bonuses for civil servants and tax reductions for house buyers as well as reducing unemployment benefits and cutting down on local administration officials.
"Spain is in a very weak position because of its excessive indebtedness and serious recession," Rajoy told lawmakers in Madrid when presenting the third round of government cutbacks.
The extra steps are part of the terms demanded in return for the eurozone bank bailout and extension to the timeframe for balancing the state books. Eurozone finance ministers have agreed to provide 30 billion euros for Spain's banks before the end of July and given a time extension until 2014 for Spain to hit budget deficit targets.
Rajoy has an absolute majority in parliament and elections are not due until 2015.
Miners on the march
Four hundred miners arrived in Madrid on Tuesday night after leaving their homes for a protest march to the capital on June 22. They had walked up to 400 kilometers in two groups – one from northern Asturias and Leon regions and the other from the northeastern Aragon region.
A 20-year closure programme for Spain's mines has left just 40 pits still active. They employ some 8,000 miners as well as sustaining other jobs indirectly. Twenty years ago there were nearly 30,000 miners in Asturias alone.
Miners are protesting the government's decision to slash coal industry subsidies this year to 111 million euros from 301 million euros last year. Spanish coal's state subsidies are due to be eliminated by 2018 under European Union agreements.
The 63 percent cut in subsidies to coal mining companies comes as they struggle to maintain a share of the Spanish energy market. Gas-fired electrical plants and renewable energy sources as well as cheaper imported coal are all competing with Spain's own coal producers in the energy market.
Francisco Martin, a 35-year-old miner from the northern town of Arino told the AP news agency that "If they close this, there is nothing. They have had many years to re-industrialise but they have done nothing. If they close the mine, they throw us out and where are we going to go?"
The Spanish government has also cut funding for miners to learn new professions and for school grants for their children.
Overall unemployment in Spain is running at more than 24 per cent . Youth unemployment stands at 51.4 percent.