Spain faces union protest over deficit cap law

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Spain's government faced mass union protests Tuesday over a law enshrining balanced budgets in the constitution in an urgent response to the unfolding eurozone debt crisis.

Major unions -- the Labour Union and General Workers Union -- vowed to hold an evening rally in the heart of the capital to demand a referendum before the constitution is changed.

"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.

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 figure for the structural deficit at 0.4 percent of annual gross domestic product from 2020.

Although unions oppose the change, it easily swept through the lower house with support from both the ruling Socialists and conservative opposition Popular Party.

It is expected to cruise through a Senate vote Wednesday.

There will then 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 is widely expected to win.

Even as Spain pushed through its own reforms, it pointed the finger at Greece and Italy for battering market confidence by failing to meet their deficit-cutting targets.

"We are living through economic turbulence which is evident every day," chief government spokesman Jose Blanco told Telecinco television.

"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Italy announced a 45.5-billion-euro austerity package last month but has since withdrawn plans to trim pension costs, scrapped plans to tax high earners and eased planned cuts in local government. It restored some of those measures on Tuesday.

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 we 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.

© 2011 AFP

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