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IMF chief-Spain's Zapatero in tough spot on pensions

Source: Reuters - Thu 4th Feb 2010

Spanish Prime Minister Jose Luis Rodriguez Zapatero is facing a difficult situation over pension reform but Spain needs to make an effort to help its economy out of the financial crisis, the head of the IMF said on Thursday.

Zapatero's government backtracked on a new pension reform plan on Wednesday after an outcry from labour unions and media.

The government officially withdrew a paragraph from austerity proposals sent to the European Commission and distributed to media, saying it "was misleading".

The eliminated paragraph had suggested increasing the number of years Spaniards would have to pay into a pension plan to 25 years from 15 years. Spanish media websites immediately made it their lead story and unions reacted with fury.

"I understand Zapatero's situation. It is very difficult.The crisis in Spain is very deep, notably because of the property situation" International Monetary Fund Managing Director Dominique Strauss-Kahn told France's RTL radio.

"But the Spanish really need to make a considerable effort."

Strauss-Kahn said no country should be under the illusion that it was possible to escape the ongoing financial crisis without paying the cost.

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