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Spain to set out more austerity measures


The government is expected to unveil savings of around €5 billion

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Spain is set to announce a package of further austerity measures on Friday in an attempt to deflect the debt markets.

The government is expected to unveil savings of around €5 billion (£4 billion) by front-loading tax payments from large businesses and cutting drug costs for regional governments with a new bill on generic medicines.

Though comparatively small, the measures could compensate for any overshooting of public deficit targets by Spain's 17 autonomous regions, a persistent market worry.

Parliament has been recalled to vote next week on the measures, which are due to be presented around 1 p.m. British time and expected to win approval from lawmakers.

The tax change will save €2.5 billion in total over the course of Spain's deficit-reduction programme to 2013, economy minister Elena Salgado told Reuters last week.

Around €2.5 billion more should be saved through reductions in subsidies on medicines over the course of a single year.

The measures will boost the government's chances of hitting its target to cut the deficit to 6 percent of gross domestic product this year. The government cut the gap to 9.2 percent in 2010 from 11.1 percent in 2009.

The opposition People's Party, likely to win the elections, has dismissed the changing of tax payments, which will force large companies to pay taxes due in 2012 before the end of 2011, as an accounting trick.

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Spain to set out more austerity measures
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