Obama calls for 'resolute' spending cuts in Spain
US President Barack Obama on Tuesday asked Spain for "resolute action" to stem its widening deficit, in order to regain market confidence in the eurozone and avoid a spill-over effect from Greece.
"President Obama and Spanish President Jose Luis Rodriguez Zapatero ... discussed the importance of Spain taking resolute action as part of Europe's effort to strengthen its economy and build market confidence," the White House said in a statement.
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Washington is backing austerity measures in Spain and other European countries "because of a fear that anything might stem the recovery that we believe is taking place," Mr Obama's spokesman, Robert Gibbs, told journalists in Washington.
Mr Obama's phone call to Madrid was part of the "ongoing consultations with close allies" on the troubles affecting the eurozone, he added.
The US president has been working the phones in recent days to EU leaders struggling to defend the eurozone from growing market speculation on its ailing southern economies.
His extensive talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy are believed to be one of the catalysts behind the €750 billion bailout agreed over the weekend by the leaders of the eurozone.
Mr Zapatero is due to present on Wednesday (12 May) spending cuts of €5 billion this year and a further €10 billion in 2011, in a bid to stem the public deficit, which is currently at 9.8 percent of the GDP.
According to the eurozone's internal rules, deficits cannot surpass 3 percent of the GDP. Spain already approved an austerity package in January but has so far failed to cap its widening deficit.
EU leaders last weekend pressed Madrid for even deeper cuts, saying that these plans are not tough enough to calm markets, but Spanish finance minister Elena Salgado managed to resist the pressure, El Pais reported.
She argued that the meeting was called to discuss bail-out mechanisms, not Spanish austerity, and to plead for more time for her government to come up with additional measures.
Cutting social benefits will be tough for Spain's centre-left government as the country's unemployment rate has recently surpassed 20 percent and the economy is expected to shrink by 0.4 percent.
In addition, Spain's tax inspectors' union (Gestha) calculates that 23 percent of the country's GDP is attributable to its shadow economy, which grew about 0.7 percent last year.