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Spain Cuts 2011 Growth Forecast as Austerity Bites

Spain says cutbacks aimed at reigning in its deficit will hurt economic growth in 2011, which it now expects to be half a percentage point lower than previously forecast.

Finance Minister Elena Salgado says the government now expects economic growth for next year to be 1.3 percent, down from the previous prediction of 1.8 percent.

Salgado says the ministry was maintaining its prediction of a 0.3 percent contraction for 2010.

She announced the forecast changes late Thursday after the government approved public sector wage reductions as part of a bid to save euro15.25 billion ($18.81 billion) over two years and help reduce the nation's deficit.