The conservative leader announced a 3-point hike in the main rate of Value Added Tax on goods and services to 21 percent and cuts in unemployment benefits and civil service pay and perks in a speech interrupted by jeers and boos from the opposition.
These measures are not pleasant, but they are necessary he told parliament.
Analysts said the draconian savings plan showed Madrid was already under de facto supervision from Brussels.Spain won softer deficit targets from its European Union partners this week and also negotiated rescue aid of up to 100 billion euros ($123 billion) from the euro zone's bailout fund for its crippled banking sector.
In line with recommendations from the European Commission, Rajoy announced new indirect taxes on energy, plans to privatise ports, airports and rail assets, and a reversal of property tax breaks that his Popular Party had restored last December.
Keeping one election promise, Rajoy did not touch pensions but he said he would discuss with the Socialist opposition a change to the system in line with EU recommendations to link benefits to life expectancy. He also said the tax burden was being shifted from taxes on labour and income to consumption. SEE P8-9