The Council of  Ministers has today approved the draft budget for 2012, which includes cuts totalling 27.3 billion euros by reducing ministerial operating costs by 16.9% and increasing corporation tax for large companies.

Deputy prime minister, Soraya Sáenz de Santamaría, announced that budget did not include any increase in VAT so as not to compromise consumers' purchasing power, and that it would maintain the current pension rates.

Furthermore, civil servants' salaries have been frozen, rather than reduced, there are no reductions in unemployment benefit and nor in other social benefits, like grants.

"We've started by tightening our belts here in government and in the public sector", said Sáenz de Santamaría  with regard to the "drastic cut" in the running costs of the ministries, which is in fact even greater than had been suggested last week by the prime minister, Mariano Rajoy, who spoke of reducing costs by up to 15 %.

In addition, an effort will be made to balance the books by increasing tax income, specifically corporation tax paid by large businesses.

"We are in a very extreme situation with regard to blanacing the public books, and unemployment", said Sáenz de Santamaría after the meeting, during which the draft budget was approved.  The budget will be presented to the Congress of Deputies next Tuesday.

The main aim of the austere budget is to meet the budget deficit target set by Brussels - 5.3% of GDP.