Spain senators meet to confirm deficit cap

7th September 2011, Comments 0 comments

Overriding heated protests, Spanish senators meet Wednesday almost certain to give final approval to a constitutional reform capping future budget deficits.

Assumming it clears the Senate, where a vast majority is all but assured, Spain will have changed its constitution in just eight days in a scramble to get ahead of the unfolding eurozone debt crisis.

Spain will be only the second country after Germany to approve a "golden rule" of budget stability in the constitution, and it is racing to do so before dissolving parliament for November 20 elections.

On the eve of the vote, thousands of people joined a union protest in Madrid, Barcelona and other major cities demanding the reform be put to a referendum.

In Madrid, many carried banners reading: "I vote for my constitution!"; "Against the reform, down with the dictatorship of the markets!"; and "Constitutional-izing poverty, No!".

Organisers said 25,000 took part in the capital but police declined to put a figure on the crowd and some media estimates were closer to 5,000.

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 of parliament.

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

The reform swept through the lower house eight days earlier with a huge majority as the the ruling Socialists and main conservative opposition Popular Party overwhelmed opposition from most smaller parties, which want a referendum.

After leaping the Senate hurdle, there will be a 15-day period during which a referendum can be forced if it garners the support of 10 percent of either house.

Unions say a referendum can easily be organised during November 20 general elections, which the Popular Party, riding high in the polls, is widely expected to win.

Spain's government and the opposition bridged bitter rivalry to agree on the reform, which both agree is needed to assure government bond markets that Spain will service its debts.

It comes at a time of high political tension across the eurozone.

The Italian government has put forward new austerity measures and called for a confidence vote in parliament, allowing the Senate to vote on Wednesday on the 45.5-billion-euro ($64.0-billion) plan.

French deputies are also in the process of debating strict austerity measures.

Germany's top court added to the tensions, ruling Wednesday that aid for Greece and other rescue packages are legal but parliament must have greater say in any future bailout.

The Constitutional Court in Karlsruhe, western Germany, also said parliament may not approve pooling of national debt, a blow to hopes of some countries like Spain that the eurozone will pool its debt into eurbonds.

Prime Minister Jose Luis Rodriguez Zapatero tried to soothe markets on the eve of the Senate vote as he visited Turkey, insisting Spain would not require an international bailout.

"Spain of course will finance itself," he told a news conference in Ankara with Turkish Prime Minister Recep Tayyip Erdogan.

"We will survive these tensions. They are not good for our economy, but we will survive them.

"We have strength. We have taken measures for that and we planned for the scenarios that we might face in the last part of this year."

© 2011 AFP

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