Spain's debts to increase further next year

The latest announcement of austerity measures sparked protests on Saturday

Spain's debt levels will increase further next year, the government has predicted, putting Madrid under more pressure as it continues efforts to trim spending.

Treasury Minister Cristobal Montoro said debt would likely reach 85.3% of the country's annual economic output this year, increasing to 90.5% in 2013.

His comments come after more cost-cutting plans were unveiled last week.

Many analysts consider it only a matter of time before Spain needs a bailout.

Banking woes

The Spanish government has found itself in financial difficulty since the 2008 global financial crisis caused a big crash in the country's over-heated property market.

This in turn meant that the Madrid had to prop up the nation's banking sector, which found itself exposed to bad housing debt.

The subsequent downturn in the Spanish economy has seen the country post the highest unemployment levels in Europe, and much lower tax returns, adding to the need for central and regional governments to cut spending.

The latest austerity measures were unveiled in Spain's latest budget on Thursday. They aim to make savings of around 13bn euros ($16.7bn; £10.3bn) next year, by cutting public sector wages, education, health and social services.

It has sparked fresh anti-austerity protests in Spain, with thousands taking to the streets in Madrid Saturday. The demonstration was mostly peaceful, but there were some clashes with riot police.

Spain is continuing to seek to avoid becoming the fourth country to need a bailout from the European Union and International Monetary Fund, after Greece, Portugal and the Republic of Ireland.

In addition to the lack of prestige, Spain wishes to avoid the strict terms of the bailouts, which force levels of cuts and timetables on the affected countries.

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