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Spain’s Parliament approved the new conservative government’s first austerity measures Wednesday, which aim to rein in the country’s swollen deficit with euro8.9 billion ($11.5 billion) in spending cuts.

The measures, which also include income and property tax hikes, were approved by 197 deputies in the 350-seat lower house, where the ruling Popular Party has an absolute majority of 185 seats after a landslide election win in November.

Finance Minister Cristobal Montoro said the measures were severe but necessary, owing to what he called the mismanagement of the economy by the former Socialist government.

“The economy is stopped, we’re on the verge of a recession and the accounts are unbalanced as a consequence, among other things, of the deplorable decisions taken by the former government, which only made the situation worse,” Montoro told lawmakers.

Spain is battling to avert being dragged further into a debt crisis that has already forced Greece, Ireland and Portugal to seek financial bailouts.

In 2010, Spain began to emerge from a near two-year recession triggered by the collapse of a property and construction bubble that had fueled growth for nearly a decade. The country now has a 21.5 percent unemployment rate _ the highest in the eurozone _ and Economy Minister Luis de Guindos said recently the economy would slide back into recession early this year with the last quarter of 2011 and the first of 2012 both registering negative growth.

Montoro accused the former Socialist government of deliberately hiding figures that showed that Spain’s deficit for 2011 would be 8 percent of national income, and not 6 percent as the Socialists had claimed easy to get unsecured personal loans. He said the deviation represented an estimated euro20 billion ($25.4 billion) “black hole.”

However, Prime Minister Mariano Rajoy has acknowledged that the deficit of regional governments, most of which are run by his own conservative party, was responsible for 75 percent of the deviation.

Other measures in the austerity package include a freeze on civil servants’ salaries and on practically all government hiring. Pensions, however, are to be increased by 1 percent, the only area of spending to rise. Taxes on income and property will also be raised but only for two years.

Treasury Minister Cristobal Montoro said the tax increases will be progressive, with the wealthiest paying more and that the impact on lower-income earners will be minimal.

The government projects that the tax increases will bring in euro6.2 billion ($7.9 billion) on top of the euro8.9 billion saved on the spending cuts.

The package was part of an extension of the 2011 budget because the last government did not pass one for 2012. More austerity measures are expected when the government presents its 2012 budget by the end of March.

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Hungary

Stocks are opening slightly lower as worries over the European debt crisis persist, overshadowing a strong auction of Italian government debt.

The European Central Bank said the continent’s banks parked a record $590.72 billion overnight at the bank, reflecting distrust in the European banking system.

Italy held two successful bond auctions Wednesday at a substantially lower cost than what it paid in similar auctions last month payday loan lenders. The sales raised hopes that the country would be able to roll over its enormous national debt with new bonds.

The Dow Jones industrial average is down 20 points at 12,272 in early trading. The S&P 500 is down 3 at 1,262. The Nasdaq is down 6 at 2,619.

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Russia unexpectedly reduced its benchmark rate, suggesting policy makers see a global economic slump posing greater risks than inflation to the world

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BRUSSELS

The Dow Jones industrial average dropped more than 400 points Wednesday after Italy’s borrowing costs soared and talks collapsed in Greece on forming a new government.

The yield on the benchmark Italian government bond spiked above 7 percent, evidence that investors are losing faith in the country’s ability to repay its debt. Greece, Portugal and Ireland required bailouts when their bond yields rose above the same mark. Unlike those countries, Italy’s $2.6 trillion in debt is too large for other European countries to rescue.

In Greece, power-sharing talks fell apart between the country’s two main political parties, raising doubt about whether the country will be able to receive the next installment of emergency loans it needs to avoid default.

Italian Premier Silvio Berlusconi promised late Tuesday to step aside after a new budget is passed, but there are concerns that the transition to a new government will be difficult. Markets see Berlusconi as an impediment to the kind of far-reaching economic reforms Italy needs to remain solvent.

“The market loves a quick solution and we’re obviously not getting one,” said Mark Lehmann, director of equities of JMP Securities. “We’ve had a strong rally off the bottom and any piece of bad news is going to be responded to negatively.”

The Dow sank 420 points, or 3.5 percent, to 11,743 as of 2:26 p.m. Eastern. If that holds, it would be the largest one-day drop for the Dow since August 4.

The Dow fell 276 on Monday of last week and then 297 points the following day after the Greek prime minister said he would put an unpopular package of austerity cuts to a public vote cash advance no faxing. That raised the prospect that the measures would fail and Greece would default. The referendum was later scrapped.

The S&P 500 lost 45 points, or 3.6 percent, to 1,230. The S&P is now negative for the year again. The index has alternated between small gains and losses for 2011 since Oct. 26.

The Nasdaq composite slid 103, or 3.7 percent, to 2,624

The slide was broad. Only two stocks in the S&P 500 index rose. Materials and financial companies fell the most. Morgan Stanley fell 8 percent and coal producer Alpha Natural Resources fell 8 percent.

Markets fear that a chaotic default by either Greece or Italy would lead to huge losses for European banks. That, in turn, could cause a global lending freeze that might escalate into another credit crisis similar to the one in 2008 after Lehman Brothers fell.

Some analysts fear that the euro itself could fall, which would lead to inflation and a breakdown in free trade agreements in the European Union.

European markets also fell sharply. Italy’s benchmark index plunged 3.8 percent. Germany’s DAX and France’s CAC-40 each lost 2.2 percent.

The prices of assets seen as safe havens rose sharply. The dollar jumped 1.6 percent versus the euro. The yield on the benchmark 10-year Treasury note fell to 1.97 percent from 2.08 percent late Tuesday, a steep drop.

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Many people think being a landlord and investing in real estate is a way to make easy money. It can be financially rewarding if you do your homework and reduce your risks. But easy, it isn

Federal Reserve policymakers considered a third round of bond purchases at their last meeting, and at least two members said the weakening economy might require it.

In the end, the Fed stopped short of expanding its portfolio of investments. Instead, it opted to shift $400 billion of its investments to try to lower long-term interest rates.

Minutes of the Sept. 20-21 meeting show the two officials, who were not named, were willing to go along with the Fed’s policy action because policymakers did not rule out taking further steps.

In its statement, the central bank also a bleak economic outlook, saying its sees “significant downside risks,” including volatility in overseas markets.

Three members of the committee, all regional bank presidents, dissented from the Fed’s statement for the second straight meeting. That marked the highest level of dissent at the Fed in nearly 20 years.

Chairman Ben Bernanke has acknowledged that the effort would not be a “game-changer.” He said the move could lower long-term interest rates by about one-fifth of a percentage point, during testimony before Congress last week.

But Bernanke also said last week that the economic recovery “is close to faltering.” He said the Fed is prepared to take further steps to support it.

The U.S. economy is barely growing and not producing enough jobs to lower the unemployment rate, which has been stuck at about 9 percent for two years.

In September, employers added 103,000 net jobs. While that was enough to ease recession fears, it takes about 125,000 jobs a month just to keep up with population growth.

Without more jobs and higher pay increases, consumers are likely to keep spending cautiously. Many have already cut back on spending in the face of steeper food and gas prices. Consumer spending accounts for 70 percent of economic activity.

Lower rates could help in a number of ways. Homeowners could refinance their mortgages at lower rates, leaving them more money to spend or pay down debt. Businesses could expand or invest at lower costs, allowing some to hire more workers.

But economists doubt the Fed’s latest move will do much because interest rates are already at historic lows. Last week, Freddie Mac said the average rate on the 30-year mortgage fell below 4 percent for the first time ever, to 3.94 percent.

In addition to shuffling its portfolio, the Fed has said it plans to keep short-term rates at record lows until at least mid-2013, assuming the economy remains weak.

The three regional bank presidents also opposed that decision. The dissenters argued that the actions the Fed has taken are raising the risks that inflation, currently at low levels, could become a problem once the economy begins to grow at stronger speeds.

Other Fed officials, however, are pushing for the central bank to do more. Some support a third round of bond buying that would expand the size of the Fed’s already record holdings of Treasury securities. One Fed official, Charles Evans, president of the Chicago Federal Reserve Bank, has argued for a change in the Fed’s guidance that would link any pledge to keep rates at low levels until unemployment, currently 9.1 percent, falls below 7.5 percent.

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The European Central Bank offered new emergency loans to banks on Thursday to help steady them through the government debt crisis, but decided to keep interest rates on hold despite fears of a sharp economic slowdown.

President Jean-Claude Trichet did not even indicate that a rate cut was due in coming months, which many experts expect will be necessary to stave off a possible new recession.

“The economic outlook remains subject to particularly high uncertainty and intensified downside risks,” Trichet said, adding however that “at the same time interest rates remain low” and that inflation will likely remain high for months.

Instead, Trichet focused on measures to keep the financial system working properly. The ECB will offer an unlimited amount of 12-month and 13-month loans to banks. That will provide banks financing for a longer period and shield them from turbulence in borrowing markets.

The ECB will also keep offering unlimited amounts of credit at its shorter-term lending operations of up to 3 months through the first half of next year free business cards.

Many European banks are exposed to losses on Greek debt. That has made borrowing between banks, crucial for their daily functioning, increasingly difficult because of fears the money might not be repaid.

Trichet said the bank would also buy up to euro40 billion ($53 billion) in covered bonds, a type of security used by banks to raise funding. The ECB’s presence will help free up that credit market and make borrowing easier for banks.

The bank has maintained throughout the crisis that its unconventional measures such as extra credits are kept in a separate track from interest rate policy, and Thursday’s decisions continued that stance.

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