Spanish PM wants balanced budget in constitution

23rd August 2011, Comments 0 comments

Prime Minister Jose Luis Zapatero said Tuesday that Spain should amend its constitution to incorporate a balanced budget provision, in line with fellow eurozone member states struggling to tame a destabilising debt crisis.

He said he had already discussed the proposed amendment with the conservative opposition Popular Party and believes it is "feasible" for it to approved by parliament before a general election on November 20.

The reform, covering both the annual budget deficit and accumulated debt, would "reinforce long-term confidence in the Spanish economy," Zapatero told an extraordinary session of parliament called to approve fresh austerity measures worth 4.9 billion ($7.0 billion) aimed at balancing Spain's strained finances.

"We ought to be able to adapt our constitution, as others are doing or intend to do," he said.

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

Germany, Europe's strongest economy and the eurozone's paymaster, has already adopted a balanced budget law, with its annual finances set to show no deficit by 2016, and Sarkozy plans a similar provision for France.

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.

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 financial markets bet that they could be next in line for what would be even larger bailouts.

Spain's conservative opposition Popular Party, which enjoys a double-digit lead in opinion polls, has endorsed the idea.

"I think it should have already been done and things would have gone better for us," Popular Party leader Mariano Rajoy told parliament.

Changing Spain's constitution to include a balanced budget provision would require a three-fifths majority in both chambers.

The constitution has been changed only once since it came into force in 1978 following the death of dictator Francisco Franco -- in 1992 to incorporate the EU's Maastrict Treaty which set the criteria for the creation of the euro single currency.

Zapatero's government is seeking to slash Spain's public deficit to 6.0 percent of GDP by the end of the year from 9.2 percent in 2010.

"The figures for the first half of the year show that we are clearly on the path of achieving this goal," he told parliament, adding the government was putting in place additional savings "to be certain."

Under the new savings measures parliament approved Tuesday, health authorities will use to generic drugs instead of more expensive branded treatments and big companies will have to pay some tax installments earlier.

The government, which has already cut public wages and frozen pensions, will announce further measures aimed at reviving the economy and slashing the deficit at an extraordinary cabinet meeting on Friday.

Earlier Tuesday, Madrid paid lower rates to raise 2.9 billion euros in a sale of three-month and six-month bonds, helped by the recent intervention of the European Central Bank in the bond markets to ease the euro debt crisis.

© 2011 AFP

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