Spain to adopt balanced budget law: PM Zapatero

23rd August 2011, Comments 0 comments

Prime Minister Jose Luis Zapatero said Tuesday that Spain should change its constitution to incorporate a balanced budget provision, as part of wider efforts to combat the eurozone debt crisis.

The reform, covering both the annual budget deficit and accumulated debt, would "reinforce long-term confidence in the Spanish economy," Zapatero told parliament as his government tries to balance Spain's strained public finances.

Earlier this month, French President Nicolas Sarkozy and German Chancellor Angela Merkel called on eurozone countries to adopt a 'golden rule' from 2012 requiring governments to balance their budgets.

Massive budget deficits, way above the EU ceiling of 3.0 percent of Gross Domestic Product, have left eurozone states with a massive debt overhang which they are now struggling to control and pay down.

Greece has had to be bailed out twice -- in 2010 and in July this year -- when it could no longer service its debt and Ireland and Portugal also needed rescues by the EU and International Monetary Fund.

Germany, Europe's strongest economy and the eurozone's paymaster, has already adopted a balanced budget law, with its annual finances set to show no deficit by 2016 and Sarkozy plans a similar provision for France.

Zapatero said the decision was "strategic, not tactical, very well understood by Spanish society and its public representatives and we ought to be able to adapt our constitution, as others are doing or intend to do."

Spain's right-wing opposition, expected to win power in November elections, has already endorsed the idea.

© 2011 AFP

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