Spain's government in deal to help crucial 2011 budget

22nd September 2010, Comments 0 comments

Spain's minority government said Wednesday it has struck a political deal that could allow it to pass the 2011 budget, crucial to its plan to slash the public deficit and convince nervous markets.

The head of the Basque Nationalist Party (PNV), Inigo Urkullu, said the government has agreed to transfer 472 million euros and the authority for "active employment policies" in the Basque Country, describing it as an "historic event."

The parliamentary spokesman for the Socialist Party, Jose Antonio Alonso, said that deal was "an essential element" for securing the PNV's support in parliament for the 2011 budget.

However, he emphasised "we will not take (the PNV's support) for granted, we must continue working."

Failure to pass the 2011 budget by the end of the year could bring down the government and force new elections at a time when Spain is trying to reassure investors over the state of its economy and its ability to rein its deficit.

With 169 seats in Spain's 350-member assembly, Prime Minister Jose Luis Rodriguez Zapatero's Socialists are seven short of a majority and pass legislation on a vote-by-vote basis with the backing of smaller parties whose support has become increasingly uncertain.

The PNV has six deputies and, even with their support, the Socialists would need to negotiate with other smaller parties to find the extra seat.

The main conservative opposition Popular Party and a Catalan regional party, the Convergencia and Union, which has 10 seats, have already indicated they will not support the budget.

The government is to reveal its budget proposals on Friday.

Markets have been jittery over Spain's high public deficit, which peaked at 11.2 percent of gross domestic product last year, fearing the country could suffer the same fate as Greece which needed a bailout from the European Union.

But these concerns have gradually eased since Zapatero's government earlier this year implemented the sharpest spending cuts since Spain returned to democracy following the death of dictator Francisco Franco in 1975.

The cuts aim to bring the public deficit down to 6.0 percent of GDP in 2011 and to the eurozone limit of three percent in 2013 with measures including cuts to civil servants' wages, a sales tax increase and a freeze on pensions.

The cutbacks have been seen as a policy U-turn by the unions which have called a general strike for September 29 -- the first since Zapatero came to power in 2004.

Zapatero said in July that the "2011 budget which we will present in September will of necessity be restrictive and austere."

© 2010 AFP

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