Some economists are concerned that deep austerity measures could hurt already weakened growth and further endanger the deficit targets. The cuts come despite popular resistance – a general strike on Thursday disrupted transport, halted industry and on occasion erupted into violence – and against a grim economic backdrop Spain is thought to have fallen back into recession in the first quarter of 2012. There will be no changes to jobless benefits, a major expense in a country which has the highest unemployment rate in Europe with almost 24 percent of the workforce is on the dole and half of all Spaniards of working age under 25 without a job. Madrid hopes to cut the deficit this year to 5.3 percent of GDP, the level the European Union says is needed to avoid a Greek style bailout. Changes in taxes on personal income and company profits should increase revenues - particularly the elimination of corporate tax deductions. The austerity measures – including some announced last December – add up to 27 billion euros. “ “This government will not raise value added tax but is calling for an extra effort within corporate taxes,” she added.

Deputy Prime Minister S?enz de Santamar?�a said: “The government is trying to put in place all the measures necessary to change the situation – to end Spain’s complicated public deficit and unemployment situation, so that we can return to growth and hire workers.

The tough austerity measures were demanded by Brussels to slash Madrid deficit to manageable levels. Civil servants’ salaries will also be frozen this year and electricity prices will rise by seven percent. All ministries will have their spending slashed by just under 17 percent. Spain’s government has announced further deep budget cuts for this year in its increasingly unpopular austerity drive, one day after an anti-austerity general strike paralysed Spain.

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