MADRID: The Spanish government approved new austerity measures and a limited economic stimulus package Friday to ease investor fears about its debt - and insisted again it was taking strong steps to right its ailing economy. Prime Minister Jose Luis Rodriguez Zapatero canceled a trip to an Iberoamerican summit in Argentina just to over see a cabinet meeting where the reforms were passed. The moves include plans to sell off a 30 percent stake in the government-owned national lottery, the partial privatization of airports, cutbacks to a key jobless benefit, tax cuts for small businesses and an increase in the tobacco tax. “We believe we are contributing to the momentum of the country's economic activity with this reform package,” said Economy Minister Elena Salgado. “We are eliminating obstacles and reducing costs.” The latest measures, first announced Wednesday by Zapatero, were welcomed by both markets and the European Union after weeks of speculation that Portugal and Spain could follow Greece and Ireland in needing a massive financial bailout. In less than three years, Spain has tumbled from being Europe's top job creator to having a eurozone high unemployment rate of nearly 20 percent, with nearly 5 million people out of work. Spain - limping out of nearly two years of recession triggered by a collapse in its real estate sector - is hoping to slash its deficit from 11.2 percent of GDP in 2009 to within the EU limit of 3 percent by 2013. In May, when markets were spooked by the near-bankruptcy of Greece, Spain cut wages for civil servants, froze most retirement pensions, and made it easier and cheaper for companies to lay people off. Zapatero also pledged to reform the pension system by Jan. 28, and is likely to raise retirement age from 65 to 67, a move that sparked a nationwide strike in September.
