Spain's new government has announced a higher than expected 2011 deficit as it unveiled spending cuts and taxes increases to claw back €15.1 billion in 2012.
Freshly installed after beating the Socialists in November 20 elections, Prime Minister Mariano Rajoy's centre-right administration said it had found the books in a bad state.
Spain's closely-watched public deficit would be about 8% of gross domestic product in 2011, well beyond the official 6% target, it said.
"It is a much higher figure than had been communicated and promised by the previous government," Rajoy's deputy, Soraya Saenz de Santamaria, told a news conference after a cabinet meeting.
"We are facing an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures," she said, as the Popular Party government had to break the news of higher taxes. These austerity measures were just the "beginning of the beginning", she warned.
The government announced a freeze of public sector wages and new hiring, but it will allow pensions to rise by 1% in 2012, and it extended minimum payments to the jobless whose benefits run out.
It also announced plans for spending cuts of €8.9 billion, including lopping €1.6 billion off public works. At the same time, income and capital taxes will rise bring in another €6.275 billion.
Rajoy has vowed to meet Spain's target of reducing the public deficit to 4.4% of gross domestic product in 2012, come what may.
He had predicted €16.5 billion in austerity measures for next year, rising by €10 billion for each percentage point of deficit slippage. His deputy said the government would try to protect the most vulnerable from the impact of the measures.
A full budget plan is to be unveiled in March when the 2011 public deficit is known, the government has said.
The government also plans to present labour market reform plans on January 7. Rajoy has asked businesses and unions to agree on changes to the collective bargaining system and hiring laws.
