Spain outlines plan to cut deficit

By DANIEL WOOLLS Associated Press Writer

MADRID (AP) - Spain will cut civil servants' salaries this year as part of a deficit-reduction plan to ease worries the country will slide into a debt crisis like that of Greece, the prime minister said Wednesday.

Jose Luis Rodriguez Zapatero told Parliament the average 5 percent reduction starting in June is part of a cost-cutting plan, first announced Sunday, that also includes a suspension in automatic increases in retirement pensions, a drop in overseas aid and a reduction in government investment.

The goal, he said, "is to contribute, with our financial stability, to the financial stability of the eurozone."

"We are going to ask everyone for a stronger effort. First, from Spanish society, but also from the government," he said.

Zapatero fleshed out the details of the plan announced Sunday for deeper spending cuts to reduce Spain's deficit from 11.2 percent of GDP last year to 9.3 percent in 2010, and eventually to 3 percent in 2013. For this year and next, the plan calls for spending cuts totaling euro15 billion ($19 billion). The deeper cuts are designed to take an additional 1.5 points off the deficit by the end of 2011.

Zapatero said his own salary and those of other senior members of the government would be cut by 15 percent.

The reduction in civil servants' pay marks an about face for a government which had insisted as it weathered the European debt crisis in recent weeks that such salaries would not be touched.

Spain has come under intense pressure recently to take strong measures to slash its deficit, namely at the weekend emergency EU meeting in Brussels at which the bloc devised a euro750 billion rescue plan to prop up the euro and support debt-heavy governments.

Even President Barack Obama has intervened, urging Zapatero to take "resolute action." The White House says Obama delivered the message to Zapatero in a phone call Tuesday.