Debt crisis: Spanish budget - as it happened, September 27, 2012 - Telegraph We've missed him, haven't we? 18.02 Eurogroup president Jean-Claude Juncker announces ESM treaty has been enacted. EFSF officially dead. 17.57 A recap of the main points: Spain will introduce spending cuts and tax rises of €40bn next year in a effort to cut its deficit. The bulk of this will come in the shape of cuts to ministerial spending (8.9pc). It will also extend a wealth tax and introduce a 20pc gambling tax. New tax measures will boost revenues by €4.7bn over two years. Debt servicing costs will be €38.6bn in 2013 - representing an annual increase of 34pc. This raises central government spending by 5.6pc next year, according to the budget minister. The country will tap €3bn from an emergency fund in order to pay pensions. By law, this is the maximum amount it can withdraw. The EU likes this plan. It said so in a statement. As an aside, Spain's deputy PM warned that Catalonia cannot break away from the country unless it consults Madrid. 17.43 Kathleen Brooks at Forex.com delivers her verdict on the budget: After waiting three hours for it, Spain finally delivered its 2013 Budget this afternoon. After some early remarks on car scrappage schemes and milk levies, the meat of the budget is that there will be EU 40bn of spending cuts next year, with government spending falling by approx. 8.9% compared with 2012. The Spanish over-deliver, just This is slightly larger than the EU39bn the market had been expecting and nearly 60% of the budget consolidation will come from spending cuts with the rest from tax increases. Overall, this budget is fairly underwhelming. Tax increases will fall on lottery winnings and a potential pension raid (although the details of this is still fuzzy). The government is trying to walk a tightrope between placating the EU authorities and also placating an angry public - the government wrapped up the press conference by saying that welfare spending still makes up 64% of this budget. A bailout by the back door? It was over to Economy Minister De Guindos to say that the Spanish reform plan "exceeds the recommendations of the EU," which could be a back door way for Madrid to make a request for financial aid, although as yet Spain has still not made a formal application for funds. The immediate reaction to this Budget could be fairly muted: firstly, it was delivered just as the markets were closing and Europe was going home, secondly, a lot of the detail was leaked and there is not that much new in the Budget. 17.19 Olli Rehn, EU commissioner for economic affairs, comments on the Spanish budget: The comprehensive reform plan announced today by the Spanish authorities is a major step to broaden and deepen structural reforms, building on important achievements made already. The reform plan includes concrete, ambitious and well-focused measures and establishes clear deadlines in many areas. This new structural reform plan responds to the country specific recommendations issued to Spain under the European semester and goes even beyond them in some areas. The reforms are clearly targeted at some of the most pressing policy challenges. Further enhancing the flexibility of product and labour markets will indeed be critical to boost growth and employment and to support fiscal consolidation. I particularly welcome the ambitious plans to establish an independent Fiscal Council, to further liberalise professional services, and to effectively reduce the fragmentation of the internal market in Spain. Labour market measures complement past reforms of collective bargaining and employment protection. The planned reform of the vocational education system is particularly pertinent. Spain is facing important challenges to correct very sizable macroeconomic imbalances which require a comprehensive policy response. The measures announced today are a further important step towards addressing these challenges. 17.15 Catalonia cannot hold a referendum on independence unless it consults Madrid, says Ms Saenz de Santamaria. Mr Montoro adds that he does not think Spain's €18bn liquidity fund, which was set up to help struugling Spanish regions pay their bills, will need any additional funding. 17.12 On whether the country will head to Brussels to seek a full-scale rescue, Mr de Guindos says that it is still analysing conditions of the ECB bond buying programme, and that a decision will be made when the impact on Spain and the eurozone is fully known. 17.10 Spanish economy minister Luis de Guindos stresses that the measures undertaken in this budget exceed EU expectations. 16.56 Spain will try to bring real retirement age in line with legal retirement age. Steve Collins at London & Capital Asset Management: 16.51 Gold is on its way up as Spain unveils its Budget. Hits $1,770 an ounce. 16.48 Cristobal Montoro says 2013 Budget spending to increase 5.6pc, ministries' spending to fall by 8.9pc next year (about €40bn). Spain will reflect all EU recommendations in economic reforms plan. 16.47 Steve Collins, at London & Capital Asset Management: 16.45 Cristobal Montoro unveils 20pc gambling tax. Says new tax measures will boost revenues by €4.7bn over two years. Debt servicing costs to be €38.6bn in 2013. Spain will also eliminate tax deduction on home purchases. Extension of wealth tax to raise €700m next year. Spanish Treasury Minister Cristobal Montoro (R) talks next to Economy Minister Luis de Guindos during their news conference on Thursday (Photo: Reuters). 16.44 Owen Callan, fixed income dealer at Danske Markets: 16.40 Spanish government sees unemployment bottoming out and has predicted an average rate of 24.3pc for next year. 16.38 Spanish deficit targets: 6.3pc in 2012, 4.5pc in 2013, 2.8pc in 2014, 1.9pc in 2015. 16.37 These cuts are aimed at chopping €40bn off Spain's budget deficit next year. Cristobal Montoro says adjustment in spending will be worth 0.77pc of GDP in 2013. Adjustment in revenue will be worth 0.56pc of GDP. Tax income will be higher than budgeted this year. Tax revenue to grow 3.8pc in 2013 versus this year. 16.30 Spanish Treasury minister Cristobal Montoro says the 2013 Budget is based in a "light" recession next year. He expects the economy to shrink 0.5pc next year. Is there such a thing as a "light" recession? Surely you're either in recession or you're not. Odd phrase to use. 16.28 The euro has extended its losses versus the dollar and the yen to hit new session lows. IBEX down 0.5pc. 16.25 The Spanish government is to tap €3bn from pension reserve fund to cover its liquidity needs. 16.22 Soraya Saenz de Santamaria says 43 new laws to reform the Spanish economy will be put forward over the next six months. 16.19 Spain will adopt new measures to reform public administration and deepen labour market reform. Energy, services and telecom sectors will be liberalised further. 16.17 Soraya Saenz de Santamaria says revenue targets for 2012 will be met. Government to adopt measures to limit early retirement and will set up an independent fiscal authority that will monitor deficit reductrion and spending. 16.14 Spanish deputy prime minister Soraya Saenz de Santamaria (below) says the 2013 Budget will be focused on cutting spending rather than raising taxes. She admits that social spending will be the focus of the cuts. 16.12 Spanish press conference on the Budget gets under way. 15.09 Details of the budget have been leaked to Europa press and Spanish daily El Pais. The paper reports that €20bn of new measures will be announced, including a freeze on public sector wages for a third year and cuts in ministerial and public sector investment budgets of 12.2pc and 15pc respectively. The paper also highlights that Spain's debt servicing costs in 2013 will soar to more than €38bn, compared with €9.1bn this year. This means interest payments will exceed public sector staff costs (reported to be €33.2bn) for the first time. 14.39 The Spanish government will hold a press conference at 4pm UK time on economic reforms and its 2013 budget, an official has told Reuters. 14.35 Ambrose Evans-Pritchard, our international business editor, has posted a blog on Europe's betrayal of Spain. He writes: The Spanish bubble was after all a joint venture. Spain was flooded with cheap capital from Germany and Holland that it could not prevent or control under the EMU system. Did the German and Dutch regulators recognise the danger, or try to stop the excesses? They were complicit. The ECB's uber-loose money (to help Germany when it was in slump) led to negative real interest rates for Spain - minus 2pc for years - that fuelled a massive credit boom. Policy was far too lax for a fast-growing Tiger economy. Did the Spanish make big mistakes? But the ECB and the European Commission did not make that critique at the relevant moment. They too were smoking weed. Spanish PM Mariano Rajoy (Photo: Getty). 14.27 Still no news from Spain... 14.21 Here's Mr Monti's quote in full: Should there be a special circumstance, which I hope will not be, were I to be asked, I would consider. He may be labelled a technocrat, but that was spoken like a true politican. 14.18 Mario Monti has just said that he hasn't ruled out running for a second term as Italian prime minister, according to flashes on Bloomberg. This contrasts with his comments yesterday on CNN, where he said: I don't need to [run], because the president of the republic appointed me senator for life. And I think it's important that the full political game resumes in Italy, hopefully with a higher degree of responsibility and of maturity. We are helping that by being part of the European Union. Obviously, I will facilitate as much as I can the evolution. You can watch the full interview here: 14.08 More fighting talk from the president of Germany's central bank this afternoon. Jens Weidmann is backing the austerity hawks on legacy bank debts. He told an audience in Berlin that the eurozone's proposed banking union cannot take responsibility for existing bad loans. In order to keep liability and control in balance, only risks that have arisen after common supervision is established can be taken under joint liability The legacy burdens on bank balance sheets have to be underwritten by the countries under whose supervision they have arisen. 13.51 The US economy only grew by 1.3pc in the second quarter, official data show. This is much lower than the previous estimate of 1.7pc. In a statement, the Bureau of Economic Analysis said: The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased. The deceleration in real GDP in the second quarter primarily reflected decelerations in PCE, in nonresidential fixed investment, and in residential fixed investment that were partly offset by smaller decreases in federal government spending and in state and local government spending and an acceleration in exports. 13.23 There are reports that the Spanish budget will be delayed until 2pm. 13.11 The Czech CNB central bank has cut its key interest rate by a quarter point to 0.25pc today - the lowest since the country became independent in 1993. 12.48 A bit of lunchtime reading from the chaps at Open Europe, who have examined the political costs of internal devaluation in a note today. Here's an extract: The experiences of the Baltic states show that large-scale internal devaluation is both economically possible and desirable, in terms of returning to economic growth. However, the Baltics" adjustment was preceded by very rapid GDP growth. Significant contraction in wages and GDP had less perceived effect since the population had yet to consider the pre-crisis standard of living as the norm. In contrast, in Greece and Spain, high wages, social benefits and public services have been a feature of life for decades, meaning that it is far more challenging to get voters to accept anything less. To illustrate the political challenge at hand: a 17% contraction in Greek real GDP by 2013 (expected by the IMF) puts Greece back to 2002, meaning that Greek GDP per capita will have fallen from over €16,000 in 2007/8 to under €13,000. Similarly, a 20% reduction in the Portuguese economy would take it back below its 1995 level of output, a reversal of 17 years - almost an entire generation lost. 12.01 European leaders could do more to help Greece, says Mr Venizelos, although he doesn't go into specifics. He adds that EU partners must acknowledge the sacrifices its citizens have made, and not undermine the country's efforts 11.56 Evangelos Venizelos, leader of Greece's socialist PASOK party, is also speaking on state TV. He stresses that an overall agreement - including an extension - is needed to alleviate Greece's recession. He adds that the agreement must ensure debt sustainability. PASOK leader Evangelos Venizelos (Photo: Reuters). 11.46 Greek leaders have (finally) reached a "basic agreement" on a fresh package of budget cuts, according to the country's finance minister. Yiannis Stournaras told state TV that the package included a request for a two-year extension, but would need to be discussed with EU debt inspectors from the European Central Bank, European Commission and the International Monetary Fund next week. 11.16 Time for a market update. Following yesterday's heavy losses, the FTSE 100 is up 0.33pc at 5,786.91, while the CAC 40 in Paris is up 0.6pc at 3,436.45 and the FTSE Mib in Milan is up 0.5pc at 15,479.73. The IBEX 35 in Madrid has fallen 0.25pc to 7,834.80. 11.14 The UK Treasury has welcomed the revised GDP figures. In a statement, it said: The UK is continuing to deal with real challenges at home and abroad, and the government's relentless focus is on addressing them and supporting growth in the economy. There are signs the economy is healing: the deficit is down by a quarter; inflation has halved and employment is rising with more than a million private sector jobs created in the last two years. She added: