Spain's Prime Minister Mariano Rajoy speaks during a control session at the Spanish Parliament, in Madrid, Spain, Wednesday, July 11, 2012.
The Spanish s government has imposed further austerity measures on the debt-ridden country to avert financial collapse as angry miners rallied against subsidy cuts.
Addressing the parliament on Wednesday, Prime Minister Mariano Rajoy unveiled sales tax hikes and spending cuts aimed at shaving 65 billion euros (some $80 billion) off the state budget over the next two and a half years, the Associated Press reported.
"These are not pleasant measures but they are necessary," said the 57-year-old leader of the conservative Popular Party.
He also warned that Spain's future was at stake as it grapples with recession, a bloated deficit and investor wariness of its sovereign debt.
“We are living in a crucial moment which will determine our future and that of our families, that of our youths, of our welfare state,” said Rajoy.
“This is the reality. There is no other and we have to get out of this hole and we have to do it as soon as possible and there is no room for fantasies or off-the cuff improvisations because there is no choice,” the Spanish prime minister pointed out.
According to the new austerity measures announced by Rajoy, VAT goes up to 21 percent from 18 percent, and the reduced rate on some products such as food goes up to 10 percent from eight percent. A special four-percent rate on basic needs such as bread is untouched.
Meanwhile, Public administration is to be reformed to save 3.5 billion euros, including a drastic cut in the number of publically owned enterprises and a 30-percent cut in the number of local councilors.
Rajoy’s announcement of a new raft of austerity measures came as thousands of miners stung by a huge cut in government subsidies marched through downtown Madrid.
Spain’s fresh austerity package is imposed a day after eurozone finance ministers agreed in Brussels, Belgium, to provide a first slice of 30 billion euros ($36 billion) for Spain's banks this month.
The jobless rate in Spain is nearly 25 percent and the forecast is for the economy to shrink 1.7 percent this year.
Spain - the fourth-largest economy in the eurozone - is mired in its second recession in three years.