Spain's next PM announces deficit-cutting goal

December 19, 2011 - 7:50 AM
Spain Financial Crisis

A demonstrator holds a newspaper criticizing Mariano Rajoy, during a march against planned cutbacks, in Pamplona, northern Spain, Saturday, Dec.17, 2011. Next week Mariano Rajoy will be appointed as the next Spanish Primer minister , as Spain suffers in the economic crisis with more than five million unemployed. (AP Photo/Alvaro Barrientos)

MADRID (AP) — Spain's next prime minister says his conservative government wants to reduce the country's deficit by euro16.5 billion ($21.6 billion) next year and warns that very hard times lie ahead.

Mariano Rajoy spoke to Parliament but did not say what mix of spending cuts or tax hikes might be used to get the deficit down to Spain's stated goal of 4.4 percent of GDP in 2012.

Rajoy reviewed Spanish economic figures such as its jobless rate, which he said had risen to around 23 percent. He said "the panorama could not be more somber."

Rajoy's Popular Party won Nov. 20 elections by a landslide. He has a comfortable majority in Parliament and will be voted in as premier on Tuesday, then formally take office Wednesday.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

MADRID (AP) — Spain's next prime minister faces Parliament on Monday and may outline the painful austerity measures and labor reforms ahead for a country already buckling under a nearly 22 percent jobless rate and mountains of debt.

Conservative Mariano Rajoy of the Popular Party speaks to the lower house of the legislature, kicking off debate on swearing him in as premier after his party's landslide win in Nov. 20 general elections. A yes vote is assured because his party has an absolute majority.

Rajoy has spoken very little since the election, making Monday's speech keenly awaited in Spain and abroad. Spain's borrowing costs have soared in recent months as investors became increasingly wary of Spanish debt, and any of his statements could affect the markets.

But it is not clear how much detail Rajoy will give on how he plans to meet deficit-reduction goals while trying to keep Spain from slipping into another recession. His party has said much will depend on how bad public finances are when 2011 ends.

After opposition parties speak, Rajoy will be voted in on Tuesday and take the oath of office Wednesday.

Spanish newspapers reported Monday that Rajoy might announce measures such as streamlining government by merging several ministries, which could mean layoffs for those without layoff-proof civil servant status, and cuts in infrastructure projects, which would hurt the already moribund construction sector.

Another pressing issue concerns reforms to chip away at Spain's staggering jobless rate, the highest in among the 17 nations that use the euro, which soars to 45 percent for people under 25.

The outgoing Socialist government tried to loosen up Spain's rigid system for hiring and firing but to little effect.

Spain, the eurozone's fourth-largest economy, is often cited along with Italy as a candidate to be the next country that might have to join Greece, Ireland and Portugal in accepting an international bailout. But Spain's economy is bigger than those three smaller nations combined and considered too big for Europe's rescue fund to handle.

Rajoy will hold his first Cabinet meeting Dec. 23, and more concrete measures could be announced then.