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Spain 'Considering new taxes'

Source: Reuters - Fri 3rd Dec 2010

Spain's government is contemplating new taxes on tobacco, alcohol and fuel as it fights to cut its high budget deficit and calm investor concerns, newspapers claimed today.

Spokesmen in the prime minister's office and economy ministry declined to comment, saying if there were any new fiscal measures they would be announced at the weekly government news conference later today.

Spain's cost of financing has risen to record highs in recent days on fears it could end up needing a bailout like that of Greece or Ireland, throwing the euro currency deeper into crisis.

Economy minister Elena Salgado told BBC radio this morning that the euro zone could not exit its current crisis unless its members adopted common economic policies, a controversial idea not shared by all the currency zone's leaders.

Spanish prime minister Jose Luis Rodriguez Zapatero has passed an austere 2011 budget and decreed labour market reform to show his country's commitment to cutting spending and making the economy more efficient.

This week he announced new measures, that the government will sell off parts of its airport and lottery businesses to raise funds.

The government aimed to raise an extra 1.0 billion a year with a tobacco tax hike, El Mundo daily newspaper said, revising down a figure of 1.2 billion it reported on its website yesterday evening. Other papers said the government has not ruled out fuel and alcohol tax hikes as well.

El Pais said the tobacco tax could be pushed through before the end of the year.

Spain's public deficit stood at 11.1 per cent of gross domestic product in 2009 and analysts have warned the country would need to take extra measures in addition to those already announced this year to help bring that down to a target of 6.0 per cent in 2011.

Spain's bank restructuring fund, set up to oversee the merger of the country's savings banks, will raise a further 2 billion on capital markets in coming months, the Financial Times reported yesterday.

A spokesman at the economy ministry said he did not have any information on that report.

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