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Minister rejects Brussels calls for tax hikes

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Minister rejects Brussels calls for tax hikes
Spain´s budget minister Cristobal Montoro is holding firm against tax hikes requested by the European Commission. Photo: Dani Pozo/AFP
14:30 CET+01:00
Spain won't bow to pressure from the European Commission to improve its economic situation by bumping up several key taxes, budget minister Cristobal Montoro said on Wednesday.

"We are not going to increase taxes further," Montoro told Spanish television channel TVE.

The European Commission said on Tuesday that Spain had made good progress with the reforms demanded in return for a eurozone bailout for its banks last year, but suggested further fiscal measures.

It said Spain should extend last year's sales tax measures by limiting the number of items in the lower tax bracket and should increase environmental taxes such as that on fuel.

Prime Minister Mariano Rajoy's conservative government imposed tax hikes and spending cuts last year to meet European authorities' targets to lower its
deficit and strengthen its finances.

The collapse of a housing boom in 2008 threw Spain into a deep double recession that has driven the unemployment rate above 26 percent.

Last year's tough fiscal reforms have increased the hardship of ordinary Spaniards in the recession and have made the government unwilling to impose yet more such measures.

Spain said last week that it had cut its deficit from 9.4 percent of gross domestic product in 2011 to 6.7 percent in 2012. That slightly overshot the 6.3 percent target demanded by Brussels.

Montoro on Wednesday said Spain's definitive deficit figure would be sent to Brussels at the end of March after financial data from local authorities are added.

He insisted it would not exceed the 6.7 percent estimate overall, however.

"If it does not stay at that figure, it will be lower," he said.

The government is targeting a deficit of 4.5 percent of GDP for 2013, but the European Commission warns it is likely to be more like 6.7 percent again.

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