Spanish Cabinet has recently submitted by Prime Minister Jose Zapatero’s economic stimulus package, in addition to previously announced sale of state assets, tax relief for small and medium enterprises, suspended unemployment benefits and other content, but also to reform the retirement system, to levy heavy taxes on tobacco industry so as to get rid of financial difficulties.

Retirement system reform

Spain Cabinet recently held weekly meetings to discuss the Prime Minister Zapatero’s economic stimulus plan submitted, including sale of major domestic airports and state-run lottery operator part of the shares, and stop the monthly payment of subsidies to the unemployed.

In the ensuing cabinet members announced at a news conference, the program was adopted.

“We believe that implementation of these reforms will promote economic growth, promote reform, fiscal consolidation,” Economic and Fiscal Policy Minister Elena Salgado, full of confidence.

Deputy Prime Minister Kava said the Cabinet proposed next meeting on January 28, through pension reform program, the current gradually increase the retirement age of 65 to 67 years. “We agree that the Government by January 28 next year, pension reform program in order to submit a parliament.”

Government of Spain a year ago proposed retirement system reform program, aimed at ensuring the social security system in the budget deficit rise, increasing the impact of population aging is running well and strong dissatisfaction caused trade unions, the birth of the strike. Mention of this sensitive day, the Spanish government reform, trade unions fear will face resistance.

Levy heavy taxes on tobacco was

Salgado at the press conference that the Government decided to levy heavy taxes on the tobacco industry will be. According to her statement, the policy is expected to increase 780 million euros for the government tax revenue.

“Now is the right to increase taxes on tobacco products, the timing. This is a good thing to public health. Raise the price of tobacco products to reduce consumption, but also help ease the pressure on the deficit,” Salgado said.

Spanish media have previously speculated that in addition to tobacco products, the Government may to alcohol, fuel and other consumer goods “cut”, but Salgado said on that day, there is no other tax increase plan.

Mild market reaction

Program through the news, the market reaction peaceful. Spanish 10-year Treasury yields last week, the last trading day stay at 5.2%, a slight fluctuation. Spanish IBEX-35 index closed up 0.6% over the previous day.

Statement by Salgado, Spain’s economy remains solid, but “we have to deal with such fluctuations. Tends to calm market over the past two days.”

With Greece, Ireland have been the fall of sovereign debt crises spread in the euro-zone countries. Fears that Portugal, Spain will be the next domino fell.

Spanish banking sector has been speculation that the domestic economy is one of the weakest link. Spanish real estate market ups and downs over the past few years, leaving a large number of commercial banks, bad debts, indirectly increase the financial burden on the government.

Crisis struck, the Spanish government “within the tight loose outside”, claiming the same time without relief, internal to intensify the economic stimulus plan to sell state-owned assets at the “flesh” means to raise funds.

Analysts believe that the Spanish bond market pressure Nan Xiao, difficult economic statistics highlight of this round of economic stimulus effect to be tested. EU’s fourth-largest economy into a crisis when the Spanish, the consequences are more difficult than in Greece and Ireland.

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