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Markets rallied and the value of the euro increased today. That was after Spain announced measures to slash about $50 billion from its 2013 budget. There had been speculation that the Spanish government would also ask Europe for a second larger bailout.
But as Lauren Frayer reports from Madrid, that request has yet to materialize.
UNIDENTIFIED MAN: (Foreign language spoken)
LAUREN FRAYER, BYLINE: With a dizzying flurry of PowerPoint slides, Spanish Cabinet ministers presented their plans to pull the country out of the red, but what the world was watching for - a bailout request - did not come. Instead, civil servants' salaries will stay frozen for a third year. Government ministries will take an average 12 percent budget cut. There's even a new tax on lottery winnings. Many retirees feared their pensions would be frozen or cut. But Deputy Prime Minister Soraya Saenz de Santamaria said the government would dip into a social security reserve fund to continue paying pensions.
SORAYA SAENZ DE SANTAMARIA: (Foreign language spoken)
FRAYER: What will continue to grow is our spending on pensions, scholarships and interest on our debts, she said. Forty-three new laws are being written to help fix the economy. That includes creation of an agency to oversee public spending and something similar to America's Cash for Clunkers program, to replace old cars with environmentally friendly ones. Budget Minister Cristobal Montoro stressed that ministers are trying to preserve the social programs Spaniards hold dear.
CRISTOBAL MONTORO: (Foreign language spoken)
FRAYER: Sixty-three percent of our total spending is on social programs - pensions, unemployment benefits - he said. We want to stress that the adjustments will not affect welfare.
(SOUNDBITE OF DEMONSTRATION)
FRAYER: Those assurances seemed aimed at the thousands of Spaniards, like Sara Carmona who've spent the last few days in the streets protesting.
SARA CARMONA: And I have two kids. I am really afraid that I won't be able to pay for their university education, for their health care.
FRAYER: The budget minister forecast that 2013 would be the last year of recession here, but if the jobless rate climbs even a bit or tax revenue slides, all bets are off, says economist Gayle Allard at Madrid's IE Business School.
GAYLE ALLARD: They are saying the Spanish economy will decline by 0.5 percent next year. I hope they're right, but most of the forecasts are more around 1.4 decline or 1.9 decline.
FRAYER: As for a bailout, Allard says Spanish ministers are divided, with Prime Minister Mariano Rajoy reluctant to allow oversight from Brussels.
ALLARD: They don't really want these groups of people coming down and, you know, looking over their shoulders and telling them what to do. I think Spain's time is running out really fast.
FRAYER: This new budget could at least buy Spain some time to shore up its banking system. Europe has offered up to $125 billion in loans to Spanish banks. Tomorrow, the government is expected to announce how much of that it will need. For NPR News, I'm Lauren Frayer in Madrid. Transcript provided by NPR, Copyright NPR.