Spain has brought forward pension reforms, raised tobacco taxes and cut wind power subsidies in its latest efforts to slash its high budget deficit and calm investor concerns that it could need a financial bail-out.
The new cost-cutting and revenue-raising measures come just over a week after Spain's prime minister insisted it would not need a new round of cuts.
The Spanish government has set January 28 as the date of approval for the move to raise the retirement age from 65 to 67.
Pension reform is highly contentious in Spain and by bringing changes forward from late March to January, Socialist Prime Minister Jose Luis Rodriguez Zapatero risks angering powerful public sector unions.
The government has been left with little choice by the pressure being exerted on it by bond markets and an economy that latest data showed is still struggling to get going after one of Europe's longest recessions.
'With these reforms we think we will contribute to the economic drive, the reform drive and consolidation of our public accounts,' economy minister Elena Salgado told reporters after the weekly cabinet meeting.
She said the tobacco tax hike would raise €780m a year, less than some had anticipated. There had been speculation that the government would also raise taxes on alcohol and fuel, but Salgado said the government was not looking at any more tax increases.
The cabinet also approved a 35% cut in wind power subsidies between now and 2012 and said savings from renewable energy subsidies would total €1.1 billion to 2013. It rubber-stamped other debt-reduction measures announced by Zapatero this week involving the sell-off of parts of its state lottery and airport businesses.
Spain's relative cost of borrowing has pulled back from record highs on the back of reports of buying of its bonds by the European Central Bank. The yield on its 10-year bonds was little changed at 5.2% this afternoon.
Spain's public deficit stood at 11.1% of gross domestic product in 2009 and analysts have long warned extra measures would be needed beyond an austere 2011 budget and promised labour market reform to bring it down.
A spread of the euro zone debt crisis to Spain would be likely to exhaust the rescue funds set aside by the euro zone to deal with it.
