Spain’s new leader battles for place at euro table

Spain’s new leader will fight for a key role for his battered economy in shaping the future of Europe in summits with France and Germany, the government said Friday.

Right-leaning Prime Minister Mariano Rajoy, who took power only last month, hosts President Nicolas Sarkozy in Madrid on Monday and meets with Chancellor Angela Merkel in Berlin on January 26.

Reform to the European Union treaties will be a “key element” in discussions with both Sarkozy and Merkel, Rajoy’s deputy Soraya Saenz de Santamaria told a news conference after a weekly cabinet meeting.

European Union leaders will meet informally at the end of this month to discuss the difficult outlook for economic growth, with Greece’s woes likely to be on the table.

They are working on a new pact enforcing discipline on national budgets, hoping to formally agree it in a March 1-2 summit so as to calm market fears about the sovereign debt of fragile economies such as Spain.

That pact would bind 26 of the 27 member nations, excluding Britain, which has objected to the scheme.

Spain wants a significant voice.

“Spain considers that by its history, by the size of the country, of course with the European Union as a whole it has to have a key and fundamental role when defining the path and future of the European Union,” Santamaria said.

The 56-year-old, grey-bearded Rajoy has taken drastic measures to try to fix a hole in the Spanish public accounts.

Rajoy said this week the overall public deficit could hit about 8.0 percent of gross domestic product in 2011, missing the official 6.0 percent target set by the previous Socialist government by a wide margin.

Rajoy has vowed to stick to the 4.4 percent goal for 2012, however, and has announced the first steps of an austerity drive expected to trim the deficit by nearly 40 billion euros.

His government has announced 8.9 billion euros ($11 billion) in budget cuts, tax increases to bring in 6.28 billion euros, and an anti-tax fraud battle to recoup another 8.17 billion euros.

Sarkozy is officially visiting Spain to receive a prestigious award for his cooperation in the fight against the armed Basque separatist group ETA.

ETA announced on October 20 the end of its armed struggle after more 40 years of shootings and bombings that killed 829 people. Its operations have been hammered by Spanish police working closely with France.

The decoration, the Order of the Golden Fleece, salutes Sarkozy’s “cooperation and involvement in the fight against terrorism.”

The Order of the Golden Fleece dates from the early 15th century and is awarded by Spain’s monarch, currently King Juan Carlos.

But Sarkozy’s visit comes at a delicate moment for the French economy, too. European sources said Standard & Poor’s had decided to downgrade its top-notch AAA credit rating.