Spanish lawmakers agree spending cut in 2012

13th July 2011, Comments 0 comments

Spanish lawmakers have voted for a budget cap for 2012 that cuts spending by 3.8 percent, sending a message of austerity at a time of deep concern over eurozone sovereign debts.

The cap, agreed late on Tuesday, is only the first step in drawing up the budget but it reinforces Madrid's argument that it is doing the hard work of cutting spending and reforming the economy.

Lawmakers in the lower house passed the cap by 170-145 votes, with the governing Socialists in favour, the conservative opposition Popular Party and some leftist groups against, and 18 abstentions.

The cap must still be approved by the Senate.

Under the agreement, public spending in 2012 may not exceed 117.353 billion euros ($165 billion), 3.8 percent less than this year's budget, which was already 7.7 percent less than in 2010.

Finance Minister Elena Salgado did not rule out an even steeper budget cut for 2012.

"The figure will be the same (as the cap) or less. We will take the decision in September," she said, refusing however to link the move with market tensions that have sharply increased Spain's cost of borrowing on the debt markets.

The government has vowed to cut the public deficit from 9.24 percent of gross domestic product in 2010 to 6.0 percent of GDP in 2011, 4.4 percent in 2012 and 3.0 percent in 2013.

Analysts including the International Monetary Fund worry, however, that the 17 powerful regions may be unable to cut spending so sharply as the central government.

The regions' public deficit climbed to 2.83 percent of GDP in 2010 from 1.92 percent in 2009, exceeding Madrid's target of 2.4 percent.

In the first quarter of this year only half of the regions presented 2011 budget plans that met the official target for a public deficit of 1.3 percent of GDP.

© 2011 AFP

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