Spain points finger at Greece, Italy over turmoil

6th September 2011, Comments 0 comments

Spain pointed the finger at Greece and Italy on Tuesday for battering market confidence by failing to meet their deficit-cutting targets.

As Spain's government faced angry union demonstrations on Tuesday over its own reforms to balance the budget, it expressed deep concern over the wild market moves and the state of fellow eurozone members' economies.

"We are living through economic turbulence which is evident every day," chief government spokesman Jose Blanco said in an interview with television Telecinco.

"We are very worried because some countries are having a very bad time and are not meeting their targets -- Greece, Italy and its adjustment plan which it then went back on within days," Blanco said.

"That affects the decision of the markets that have to buy our debt and that is what puts us in a period of a certain instability," he said.

Greece conceded this month it would have to revise its public deficit target for this year, a key condition for funding from a 110-billion-euro ($158-billion) international bailout loan agreed last year.

Italy announced a 45.5-billion-euro austerity package last month but has since withdrawn plans to trim pension costs, scrapped plans to tax high earners and eased planned cuts in local government.

As Spain levelled criticism at its neighbours, it was forced to deny that it had been on the verge of needing a financial rescue itself.

"At no point have we been on the verge of being rescued," Finance Minister Elena Salgado told state radio RNE.

"Like other countries were suffered debt market tensions in August and that led to the ECB intervening, but since then we have been very far from a rescue," she said.

A day earlier a union leader had claimed that Prime Minister Jose Luis Rodriguez Zapatero told unions August 17 that Spain was on the verge of a financial rescue.

But the Labour Union chief, Ignacio Fernandez Toxo, backtracked on Tuesday, saying Zapatero did not in fact use those words.

Spain's biggest unions were preparing an evening march in Madrid to protest a legislative reform that will enshrine balanced budgets in the Spanish constitution.

Joined by civil protest groups, Labour Union and General Workers Union were demanding a referendum on the reform.

"We are hoping for a demonstration joined by thousands of people," said Labour Union spokesman Luis Maria Gonzalez.

"More than anything it is to demand a referendum," he said.

Gonzalez said a referendum could easily be organised during November 20 general elections, in which the conservative opposition Popular Party is widely expected to sweep the ruling Socialists from power.

The upper house Senate is almost certain to approve the constitutional change on Wednesday after it was overwhelmingly cleared by the lower house last week with support from the government and opposition.

After the expected Senate approval, there is a 15-day period during which a referendum can still be forced if it has the support of 10 percent of the members of either house of parliament.

Under the constitutional change, Spain must stick to a long-term deficit cap except in times of natural disaster, recession, or extraordinary emergencies and even then only with approval of the lower house.

An accompanying law to be enacted by June 30 next year would set the actual figure for the structural deficit at 0.4 percent of annual gross domestic product from 2020.

© 2011 AFP

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