Spain says new budget rule to allow deficits

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Spain's new constitutional rule on balanced budgets, aimed at reassuring nervous financial markets, will let the state go into the red during crises, the government said Wednesday.

Spain's Socialist government said Tuesday it had agreed with the opposition conservative Popular Party on the constitutional reform to give comfort to roiled markets.

"It is a measure that will reassure our investors," Finance Minister Elena Salgado told radio station Cadena Ser.

The reform to the constitution, which the government hopes to pass before November 20 general elections, will largely reflect Spain's existing budget stability law, Salgado said.

"That is to say, when the growth situation of our economy is normal, the constitution will say that the budget should end with no deficit or with a very small deficit," she said.

"But also, that same constitutional reform will allow us the flexibility so that when there is a serious economic crisis or when there is a natural disaster the budget can end with a deficit."

Spain's general elections are widely expected to deliver power to the Popular Party, which has a commanding lead in opinion polls.

© 2011 AFP

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