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Strike Hits Debt-Ridden Spain As EU Ministers Seek To Shore Up Eurozone Confidence

People hold union flags during a demonstration to protest government austerity cuts in Madrid today.
Public-sector workers in Spain staged a nationwide strike today, in the most serious challenge so far to the government's austerity program, which includes a 5 percent cut in their wages.

The strike, involving almost 3 million civil servants ranging from doctors to street cleaners, comes as the government presses ahead with a 65 billion euro package of budget cuts.

The severe measures are intended to reduce Spain's budget deficit of 11.2 percent -- almost as high as that of fellow eurozone member Greece, which has been forced to seek a bailout from the European Union and the International Monetary Fund (IMF) to prevent debt default.

The EU is still trying to restore international confidence in the eurozone, which has been badly shaken by the Greek crisis. The value of the euro this week dipped below $1.20 for the first time in four years.

To this end, eurozone finance ministers, meeting in Luxembourg, today are pondering how to strengthen oversight of member states' budgets so as to avoid further meltdowns like Greece.

'Reality Check'

EU President Herman van Rompuy said there was broad agreement that member states should show each other their budget plans for the coming year so as to undergo what van Rompuy called a "reality check."

States with a projected deficit higher than the EU norm would have to justify that excess informally. Van Rompuy said the idea is not for budgets to be checked in detail or decided upon by the European central institutions. The aim would be for a country's revenue and spending targets, its calculation of inflation and domestic growth levels, to be subjected to this reality check.

The motivation for such a move toward increased transparency relates to he fact that Greece is now known to have manipulated economic data to portray itself as eligible to join the eurozone, when in fact it was not ready.

At the Luxembourg talks on June 7, the finance ministers also signed an agreement to begin setting up a massive 440-billion-euro fund to assist if necessary weak eurozone nations -- Spain included -- which might otherwise tumble into default.

This fund is part of a larger trillion-dollar package envisioned by the EU with the support of the IMF, designed to allay international investors' fears that the Greek problems could touch off a domino effect in European economies.

EU economic and monetary affairs commissioner Olli Rehn said that there would be strict conditions applied to loans from the fund, and countries applying for assistance would have to agree an austerity program with the EU and the IMF -- as was the case with Greece's 110-billion-euro bailout.

compiled from agency reports