The new measures include an increase in the standard rate of value-added tax to 21% from 18%, and the lower rate to 10% from 8%, a cut in jobless benefits for new claimants, and a salary cut of around 7% for state employees.

They also anticipate making EUR3.5 billion in savings in local government through an ambitious process of centralizing powers at the provincial, or county, level. This is the latest step to counter three-decades of power devolution from the center that has left many concerned about the degree to which Madrid can force austerity on lower-level authorities.

Mr. Rajoy said official data suggest the economic slump will continue and gross domestic product growth will be closer to zero next year. Previously the government had forecast growth of 0.2% in 2013.

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