12 Jul 2012

Spain announces budget cuts

6:30 am on 12 July 2012

Spain's government has announced sweeping new austerity measures.

Prime Minister Mariano Rajoy says sales tax will rise from 18% to 21%, and local authorities will have their budgets slashed.

The government aims to save €65 billion as part of a deal with euro zone leaders to help rescue Spain's banks.

In other measures, the unemployment benefit will be cut from the six month out of work and subsidies for political parties and unions will be reduced by by 20% in 2013.

The move coincided with a miners' rally in Madrid, where police fired rubber bullets at crowds of protesters.

Thousands of people joined in the rally to support the miners, who have been campaigning for weeks against major cuts to industry subsidies.

Witnesses said protesters out to support the miners threw fireworks, bottles and stones at riot police.

The officers fired rubber bullets and charged at the demonstrators.