Rajoy Vows Leaner Public Sector Amid ’Dark’ Spain Outlook

Prime Minister-elect Mariano Rajoy pledged to shrink Spain’s public sector and reduce spending to tackle the euro area’s third-largest budget deficit without saying how he’ll finance higher pensions and tax breaks.

“The one and only part of public spending that will increase is pensions,” Rajoy told lawmakers in Madrid today. “All other components may be reduced.” Pensions accounted for 112 billion euros ($146 billion) of spending in the 2011 budget.