So if the bailout works, it should eventually compensate for the bitter cocktail of the new austerity package. "'It is the classic case of short-term pain for longer-term gain," Miller said.
Wednesday's increases in sales tax include a 3 percentage point hike on products and services like clothing, cars, cigarettes and telephone services to 21 percent and a 2 percentage point increase on goods such as public transport fares, processed foods and bar and hotel services to 10 percent. The sales tax on basic goods like bread, medicine and books stays at 4 percent.
Other measures outlined Wednesday included:
—€660 million of cuts in government spending beyond the reductions already outlined in the 2012 budget
— wage cuts for civil servants and members of the national parliament
— further closures of state-owned companies
— tax deductions for homeowners to be scrapped
— a 30 percent cut in the number of town councilors
— slight reduction in unemployment pay, designed to encourage jobless people to seek work more quickly.
— 20 percent cut in government subsidies to political parties and labor unions.
— possible privatization of ports, railways and airports
In Brussels, spokesman Simon O'Connor said the European Commission, the EU's executive arm, welcomed the government's announcement of the new measures as "an important step to ensure that the fiscal targets for this year can be met."
Financial markets greeted news of the measures. The interest rate on Spain's benchmark 10-year bond dropped 0.23 percent to 6.57 percent, away from the 7 percent levels it reached earlier this week, while the country's IBEX stock index closed up 1.17 percent at 6,805.9.
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