Spanish government faces up to slowdown's stern challenge

1st September 2008, Comments 0 comments

The Socialist administration marks the start of a new political term with uncertainty over budget.

1 September 2008

MADRID -- Like many Spaniards returning to work on Monday after summer vacations, government ministers will be fretting over a slowing economy battered by rising unemployment, high inflation and slumping property values.

The Socialist administration faces the challenge of passing the state budget for 2009 in the worst economic environment Spain has experienced in 15 years, and with few political friends on hand to help.

With the economy in dire shape, the budget is likely to be the focus of much of the government's attention over the coming weeks, providing a means to pump life back into an economy that grew by just 0.1 percent in the second quarter of the year.

But getting it approved in Congress - where the Socialists are seven seats short of a majority - is likely to be an uphill struggle.

The main opposition Popular Party has come out squarely against Prime Minister José Luis Rodríguez Zapatero's economic proposals to date and has accused him of burying his head in the sand after winning re-election in March.

"The most important thing this government had to do was to deal with the economic crisis, but it has failed," PP leader Mariano Rajoy told El Pais in an interview published Sunday. "It already seems like an old and worn-out administration."

The government is therefore likely to have to rely on Catalan and Basque nationalists to get the budget approved, possibly by giving in to at least some of their demands for more regional financing. That will create another drain on state coffers and could put the economy in worse shape in the long term.

[El Pais / Expatica]

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