Spain Reveals Plan to Reduce Its Giant Debt - New York Times

MADRID ? The Spanish prime minister, Jos� Luis Rodr�guez Zapatero, introduced measures Wednesday intended to distance Spain from Ireland and other ailing European countries.

Mr. Zapatero said the state would sell stakes in several assets, eliminate an unemployment benefit and create incentives for small and midsize businesses.

The measures come as nervousness mounts among investors about whether Spain, Portugal and other troubled countries that share the euro could be forced to follow Greece and Ireland in requesting bailouts.

For Spain, the concern has centered on its public finances and the 180.8 billion euros ($236 billion) in problematic exposure that Spanish financial institutions have to the collapsed construction and property sectors.

Another worry is the high level of private debt, which, when added to the public debt, is about 372 percent of Spain?s gross domestic product, according to a study by McKinsey, the consulting firm.

Mr. Zapatero has pledged to cut Spain?s budget deficit to 6 percent of G.D.P. next year from 11.1 percent last year. The government insists that it will meet its 9.3 percent goal for the year after cutting its central government deficit almost in half in the first 10 months with spending cuts.

The asset sales include a 30 percent stake in the national lottery and 49 percent of the national airport management company, which would allow the airports in Madrid and Barcelona to be managed privately.

The government also reversed its position on selling its stake in the lottery, and it will end a special unemployment benefit in February that was introduced in response to rising joblessness.

The government is ?firing on all sides, but without apparently having a clear road map to get out of it,? said Pablo V�zquez, an economist at the Fundaci�n de Estudios de Econom�a Aplicada, a research institute in Madrid.

The measures to help small and midsize businesses, which are estimated to account for about 80 percent of jobs created in Spain, include a special tax regime and lowering the costs for start-up firms.

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