Government defends VAT hike, but...

However, Soria did underline that as soon as Spain is in a position to reduce VAT, especially for the tourist industry it will because the government is well aware of the negative consequences of the move.

The airline industry, for example, has reacted angrily over the increase in airport taxes with Ryanair announcing that it intends to down size its operations at the country's most expensive airports during the summer and, more importantly, this coming winter and easyJet is also reconsidering its operations in Spain because of the excess costs now involved.

Soria though repeated that the government has had no alternative but he told the leaders of the Balearic island councils, in the company of the Secretary of State for Tourism, Isabel Borrego, that the increase in VAT has been delayed until September 1 in an attempt to limit the damage to the tourist industry.

And, he also highlighted the fact that, despite the increase in VAT and airport taxes, they still remain below those of the country's main competitors such as France, Greece and Italy.

But, he could not ignore the fact that the increases have hit domestic tourism very hard with average Spaniards far worse off than last year and looking to holiday at home on a tight budget.

The only saving grace is that the Euro is continuing to fall in value against the Pound and, as figures published in the Bulletin yesterday, showed, the British are dominating the foreign holiday market in Spain this year with a five percent increase in June in the Balearics.

Looking to the future, during yesterday's meeting, the Minister and Bauza signed an agreement which will ensure that the Balearics has a much greater presence at travel trade fairs. The Balearics and the Spanish Tourist Board, Turespaña, are going to work much closer together to ensure the Balearics is given the recognition it deserves.