Spain will phase out property tax breaks, boost support to the car and tourism sectors and create a sustainable economy fund to fight unemployment and cut the country's dependence on construction, Prime Minister Jose Luis Rodriguez Zapatero said on Tuesday.
Fighting to revive the economy and his sagging political support, the Socialist leader unveiled the new economic measures in a State of the Nation debate ahead of European parliamentary elections in June. Zapatero said plans to phase out tax breaks on mortgages from 2011 for Spaniards who earn over 24,000 euros a year would help end years of property speculation and help diversify the economy away from house building.
"Construction...will continue to have an important role, but not disproportionate and destabilising to the overall Spanish economy as it has been up till now, Zapatero said. The government plans to provide an additional 600 million euros for a subsidy scheme to boost the tourism industry and provide a 2,000 euro subsidy for new car purchases.
Zapatero will create a 20 billion euro sustainable economy fund made up of state and private credit for loans to projects focused on renewable energy, technology and infrastructure. On top of that, the 2010 budget will include an extra 5 billion euros in credit for local development projects.
Zapatero's greatest headache is unemployment that has risen faster than in any other developed country, reaching 4 million or 17.4 percent in March. To stem layoffs, Zapatero offered small firms that keep on their workforce in 2009, or increase it, a cut in business taxes. Zapatero's Socialists do not have a majority in Congress and some polls show them trailing the opposition conservative Popular Party for the first time since he entered office in 2004.
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