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TAX RISE DRIVES SPANISH INFLATION TO 16-MONTH HIGH.

Spanish consumer prices rose at their fastest pace in 16 months in September, data showed, one more headache for Madrid after ratings agency S and P downgraded its sovereign debt to one notch above junk overnight. Prices rose 3.4 percent year-on-year in September, according to data from the National Statistics Institute on Thursday, after a 3-percentage-point rise in Value Added Tax on Sept. 1. Spain's Prime Minister Mariano Rajoy increased VAT to 21 percent from 18 percent in September, as well as abolishing special low rates on products ranging from cinema tickets to school supplies as part of an austerity drive. Spain must cut the public shortfall from 8.9 percent of gross domestic product to 4.5 percent in 2013, however economists fear inflation-indexed pension hikes could make that target impossible as prices rise.

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Publication:Pakistan & Gulf Economist
Geographic Code:4EUSP
Date:Oct 21, 2012
Words:136
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