Rajoy breaks silence over tax hikes, saying government "had no option"

Spanish Prime Minister Mariano Rajoy said Tuesday that the tax hikes approved by his incoming government in December were "absolutely necessary" to rein in the public deficit.

"There was no other option," Rajoy said in an interview with Spanish newswire EFE, his first since he unveiled his Cabinet on December 23. "It was a hard, painful decision, but absolutely necessary to get out of the spiral in which we found ourselves."

The rise in personal income tax was unveiled on December 30 by members of his Cabinet, who justified the measures on the fact the outgoing Socialist government had overshot its budget deficit target last year of six percent by two full percentage points. The tax hikes were also accompanied by spending cuts.

Until his interview with EFE, Rajoy had left explanations of policy decisions to his team of ministers, particularly Deputy Prime Minister Soraya Sáenz de Santamaría.

During the campaign for the November 20 general elections, in which the Popular Party won an absolute majority, Rajoy had pledged not to raise taxes. In Tuesday's interview, Prime Minister Rajoy said he was still against raising taxes, and quashed suggestions the administration is planning to hike the standard value-added tax rate (VAT).

"That would mean an immediate rise in prices and that doesn't seem to us to be the fairest way," he said. "But if we had felt that it was necessary to hike VAT, we would not have hesitated to do so."

Picking up on an earlier remark made by Sáenz de Santamaría, Rajoy said the measures unveiled in December were only the "beginning of the beginning," with the main priority being to reduce the public deficit, which is targeted to fall to 4.4 percent of GDP this year. "In the state budget that we will present on March 31, we will make further cuts in public spending," he said.