Spain's government in deal to pass crucial 2011 budget: report

22nd September 2010, Comments 0 comments

Spain's ruling Socialist Party has struck a deal that should allow it to pass the 2011 budget, crucial to the government's plan for slashing the public deficit, Spanish national radio said Wednesday.

It said the Basque Nationalist Party (PNV) has agreed to vote with the government, which does not hold an absolute majority in parliament, when the budget is presented.

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.

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 conservative opposition Popular Party and a Catalan regional party, the Convergencia and Union, have already indicated they will not support the budget.

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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