Spanish parliament approves austerity plan by just one vote

27th May 2010, Comments 0 comments

Spain's parliament Thursday passed by just one vote an austerity plan aimed at easing fears of a Greek-style finance crisis, a slim government victory that may have averted its collapse as well as new turmoil in the markets.

The unpopular measures, which include a pay cut for civil servants, were passed with 169 votes in favour and 168 against.

The governing Socialist Party backed the bill while all others, including the conservative opposition Popular Party, either opposed or abstained.

Prime Minister Jose Luis Rodriguez Zapatero does not hold a working majority and must rely on smaller parties to govern.

It was feared that a government defeat could have forced new elections and had disastrous repercussions on financial markets, already nervous about the poor state of public finances in Spain, which just scraped out of a long recession in the first quarter.

"Everyone knows what would happen if the government had not been able to pass the bill," said the secretary general the Catalan nationalist CiU party, Josep Antoni Duran i Lleida, whose 11 deputies abstained from the vote.

"The stock market would plunge and our debt would be hit. Our responsibility is to ensure that Spain does not fall into a deeper hole. I don't want Spain to come under protection like Greece."

Spain's leading daily El Pais said earlier that the vote was "so important that a defeat of the government could bring ... an abrupt end to the legislature," while the centre-right ABC said elections are now a "national necessity."

Barclays Capital analyst Paul Robinson said prior to the vote that any "surprise block of the austerity measures in parliament today is clearly the key risk for bonds and the euro."

Zapatero, under pressure from both Spain's EU partners and the markets, announced the austerity measures on May 12 in a bid to shore up Spain's public finances amid fears it could follow Greece into a debt crisis.

The cuts are on top of a 50-billion-euro austerity package announced in January designed to slash the public deficit to the eurozone limit of three percent of gross domestic product by 2013 from 11.2 percent last year.

The latest measures include an average five-percent pay cut for public sector workers from June and a pay freeze from 2011. Pensions, except for the poorest, will also be frozen in 2011.

The government also plans to scrap a 2,500-euro payout to parents for the birth of children, a key part of Zapatero's social platform to boost Spain's flagging birth rate.

The salaries of Zapatero and government ministers will also be cut by 15 percent and those of secretaries of state by 10 percent.

In what was seen as a bid to boost plummeting public support for his government, the prime minister also plans to announce a new tax on the richest people in the country.

Unions representing public sector workers have called a strike for June 8 over the plan while Spain's largest trade union, the CCOO, said last week it would "probably" also call a national general strike.

"These measures are painful but essential," Finance Minister Elena Salgado told parliament.

But Duran i Lleida had harsh words for Zapatero, who appeared stony-faced in the chamber.

"Your time is finished..," he said. "When the (2011) budget vote comes and when you cannot pass it, call elections that the country wants and needs."

German Economy Minister Rainer Bruederle hailed the Spanish approval of the "severe" austerity measures.

"We can only achieve durable stability of the euro if each eurozone member contributes to structural measures," he said.

Spain entered recession in the second quarter of 2008 as the global financial meltdown compounded a crisis in the property market, which had been a major driver for growth in the preceding years.

Official data released last week showed the economy returned to growth in the first quarter but analysts have warned that any pick-up could be short lived.

The long period of negative growth sent Spain's unemployment rate soaring to more than 20 percent in the first quarter, the highest in the 16-nation eurozone.

© 2010 AFP

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