The Spanish government Friday announced that it was raising a tobacco tax, in yet another step to stem market concern over the country's economic stability, dpa reported.
The measure was expected to bring 780 million euros (1 billion dollars) to state coffers in 2011. It will allow the government to compensate for an estimated loss of 230 million euros caused by tax cuts for small and medium-sized companies, Economy Minister Elena Salgado explained.
The higher tobacco tax would also be in line with Spain's new and tougher anti-smoking law, the minister said. The law will ban smoking in practically all closed public places from the beginning of next year.
Prime Minister Jose Luis Rodriguez Zapatero announced the tax cuts for small and medium-sized companies, as well as other measures to boost growth and to cut spending, on Wednesday.
The measures included placing Madrid and Barcelona airports under private management, privatizing 30 per cent of the state-owned lottery company, and slashing subsidies to the long-term unemployed.
The measures were approved by the government on Friday. Zapatero had cancelled his attendance at an Ibero-American summit in Argentina to be present at the cabinet meeting, reflecting his concern over Spain's economic situation.
Spain's unemployment stands at about 20 per cent, the highest in the European Union. Another big worry for the government is the 11.1- per-cent budget deficit, which it intends to cut to 6 per cent in 2011.
Spain has earlier announced spending cuts worth tens of billions of euros, including cuts in public sector salaries, public investment and social spending, along with tax hikes and a pension freeze.
The government has also introduced a controversial reform to make the labour market more flexible.
In January, it will approve a pension reform, which will then be voted on by parliament, Deputy Prime Minister Alfredo Perez Rubalcaba said Friday. The reform is expected to raise the retirement age from 65 to 67 years.
There is concern that Spain and Portugal could follow Greece and Ireland in needing a financial bailout from the EU and the International Monetary Fund.
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