Spain points finger at Greece, Italy over debt turmoil

6th September 2011, Comments 0 comments

Spain pointed the finger at Greece and Italy on Tuesday for battering market confidence by failing to meet their deficit-cutting targets.

As Spain's government faced angry union demonstrations on Tuesday over its own reforms to balance the budget, it expressed deep concern over the wild market moves and the state of fellow eurozone members' economies.

"We are living through economic turbulence which is evident every day," chief government spokesman Jose Blanco said in an interview with television Telecinco.

"We are very worried because some countries are having a very bad time and are not meeting their targets -- Greece, Italy and its adjustment plan which it then went back on within days," Blanco said.

"That affects the decision of the markets that have to buy our debt and that is what puts us in a period of a certain instability," he said.

Greece conceded this month it would have to revise its public deficit target for this year, a key condition for funding from a 110-billion-euro ($158-billion) EU-IMF-ECB bailout loan agreed last year.

Italy announced a 45.5-billion-euro austerity package last month but has since withdrawn plans to trim pension costs, scrapped plans to tax high earners and eased planned cuts in local government.

Spain levelled criticism at its neighbours as the biggest unions prepared a march in Madrid to protest a legislative reform that will enshrine balanced budgets in the Spanish constitution.

Joined by the "indignant" protest movement over the handling of Spain's crisis, the unions -- Labour Union and General Workers Union -- are demanding a referendum on the reform.

"We are hoping for a demonstration joined by thousands of people," said Labour Union spokesman Luis Maria Gonzalez.

"More than anything it is to demand a referendum," he said.

Gonzalez said a referendum could easily be organized during November 20 general elections, in which the conservative opposition Popular Party is widely expected to sweep the ruling Socialists from power.

The upper house Senate is almost certain to approve the constitutional change Wednesday after it was overwhelmingly cleared by the lower house last week with support from the government and opposition.

After the expected Senate approval, there is a 15-day period during which a referendum can be forced if it has the support of 10 percent of the members of either house of parliament.

Under the constitutional change, Spain must stick to a long-term deficit cap except in times of natural disaster, recession, or extraordinary emergencies and even then only with approval of the lower house.

An accompanying law to be enacted by June 30 next year would set the actual figure for the structural deficit at 0.4 percent of annual gross domestic product from 2020.

On Monday a trade union leader Ignacio Fernandez Toxo told public TVE television that in the middle of August Prime Minister Jose Luis Rodriguez Zapatero told unions that Spain was close to needing a rescue package, as economies were rocked by market turmoil.

© 2011 AFP

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