Spain has announced its 2013 austerity budget, which includes spending cuts and tax rises to save another 40 billion Euros. Adam Austerfield, LSE Enterprise’s Spanish Director, was interviewed for BBC News by Huw Edwards.

An approximate transcript is below.

Q   When we talk about apocalyptic visions for what might happen in Spain are people overreacting or is it as serious as they say?

A   It’s extremely serious – I think the budget today is an attempt to try and reform some of the civil disobedience we’ve seen in Spain which has been growing over the last 6 to 9 months in particular. The apocalypse has not happened yet – however we are walking a difficult and long tightrope here. The sovereign debt issue has not gone away and for Spain at the moment even despite austerity measures being implemented, 12% cuts across government departments, it is essentially Brussels or bust for the Spanish economy.

Q   When we talk about a full bailout and the conditions that might be attached, you see the kind of temperature on the streets and the fact that people don’t like the austerity measures, how is that debate playing out in Spain? Do some people think that the option of a full bailout might even be desirable?

A   I think they’re coming to some acceptance and I think the way the government are managing it at the moment is a way in which they would like to see the least amount of conditionality on the impositions from Brussels to make sure the government forces through the reforms they have decided to make. Unfortunately the two things are mutually inclusive – you cannot have 12% cuts and major budget cuts from 4% in Justice to 30% in Agriculture without the kind of civil unrest on the streets which has already been extremely bad. It’s going to be extremely difficult over the next three months, not that it’s been easy for the last three years. But at the same time, with the release of bank data tomorrow this is an absolutely critical time for the Rajoy government.

Q   And just a final point Adam on the package of measures that they’re talking about now – what would this achieve and would it make a realistic impact on what is as you say a very very serious problem?  

A   They will but the problem in Spain is that it will take five or ten years to unwind some of the difficult positions they have here – 24% generalised unemployment, 50% youth unemployment. So a whole generation of young people is leaving Spain. They used to leave, study and then return to Spain to start businesses, join family businesses or join companies, now they leave and they stay away. It’s a major difficulty for the government to lose a whole generation of bright young things who tend to help regenerate and improve the productivity and competitiveness of the Spanish economy. So it will help, but it’s going to take a very long time. It’s a starting point for the government, if it can implement it quite fast, and go to Brussels within a reasonable amount of time to make sure that the funds that they need will arrive in time to really essentially rescue the country rather than help it through a transition.