Spain launches budget cap in constitution

30th August 2011, Comments 0 comments

Spanish lawmakers voted overwhelmingly Tuesday to launch an urgent debate on a hotly protested reform of the constitution to cap future budget deficits.

The crushing vote, with 319 in favour and only 17 against, seemed to all but guarantee it will get the three-fifths minimum support required to change Spain's constitution.

The ruling Socialist party and main opposition conservative Popular Party bridged bitter rivalry to back the proposed reform, an unexpected accord ahead of November 20 general elections.

Under the proposed reform, the broad principles of a balanced long-term budget are to be enshrined in the constitution.

An accompanying law will set a maximum structural or long-term deficit in the annual budget of 0.4 percent of gross domestic product (GDP) from 2020, a copy of the accord shows.

"We have to take a coherent and forceful decision to strengthen our country's solvency," said the Socialists' parliamentary spokesman Jose Antonio Alonso.

Spain's borrowing costs on the debt markets were too high considering its economic strengths, he said.

"There is no better way to dispel uncertainties than to elevate the principle of budget stability to the level of constitutional mandate so as to consolidate in the world a clear reality: we are a reliable country in the payment of our debts and there should be no doubt about it."

The reform -- only the second change to the constitution since it was drawn up in 1978 three years after General Francisco Franco's death -- could clear the lower house by Friday.

It would then go to the upper house Senate next week.

Most of the smaller parties voted against the reform, many demanding a referendum.

"We are substituting the sovereignty of citizens with the sovereignty of the markets," Gaspar Llamazares, parliamentary spokesman for the United Left coalition, complained to lawmakers.

Rebel lawmakers can still force a referendum, however, if they can muster support from 10 percent of either house within 15 days of its final approval in the Senate.

Spain's "indignant" protest movement against high unemployment and the handling of the economic crisis called a rally before parliament seeking a referendum.

The country's biggest unions joined with citizens' groups to call for protests Wednesday and Thursday across the country and a "major demonstration" in Madrid on September 6.

French President Nicolas Sarkozy and German Chancellor Angela Merkel earlier this month called on eurozone countries to adopt a 'golden rule' from 2012 requiring governments to balance their budgets.

Massive budget deficits, way above the EU ceiling of 3.0 percent of gross domestic product, have left eurozone states with a debt overhang which they are now struggling to control and pay down.

Spain is seeking to slash the public deficit to 6.0 percent of GDP by the end of the year from 9.2 percent in 2010. It aims to reach the EU-target of 3.0 percent by 2013.

Greece has had to be bailed out twice -- in 2010 and in July this year -- when it could no longer service its debt and Ireland and Portugal also needed rescues by the EU and International Monetary Fund.

Italy and Spain came under intense pressure in July as the debt markets worried that they could be next in line for much larger bailouts that could place the survival of the euro itself in question.

© 2011 AFP

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