Spain amends constitution to limit debt

Spain's main political powers agreed to amend the constitution to make the government legally obliged to keep its deficit low, an effort to reassure financial markets that it will keep its troubled finances under control and not need a bailout.

The ruling Socialists and the opposition center-right Popular Party cut a deal after hours of frantic negotiations to propose a law under which, starting in 2020, the national deficit cannot surpass 0.4 percent of the country's GDP.



That threshold can be surpassed only in cases of natural disaster, economic recession or other extraordinary circumstances that will have to be declared formally by a vote in Parliament.



The constitutional amendment is expected to be voted on Sept. 2 in the lower house of Parliament, while the actual law is due to be passed by July 2012.



Spain insists it is not acting under pressure from European authorities, even though French President Nicolas Sarkozy and German Chancellor Angela Merkel last week called for all eurozone nations to enact constitutional amendments requiring balanced budgets.



Spain is struggling to recover from nearly two years of recession prompted largely by the collapse of a real estate bubble. The jobless rate is near 21 percent — almost 45 percent for young people — and economic growth remains anemic.



The global economic crisis "has only made it more appropriate to incorporate the principle (of budgetary discipline) into our Constitution so as to boost confidence in the stability of the Spanish economy over the medium and long term," the two main parties wrote.



Alfredo Perez Rubalcaba, the Socialist candidate for prime minister in Spain's Nov. 2 general election, praised the accord as an essential tool to restore confidence in Spain and the eurozone after a turbulent month on the bond and stock markets. He also said the deal allows for essential wiggle room.



"We wanted stability with flexibility to let Spain react to situations that we cannot now predict," Perez Rubalcaba told reporters.



The government is in a rush to pass the constitutional amendment, both to shore up market confidence and because Parliament breaks up at the end of September ahead the general election.



The government also approved labor reforms Friday designed to encourage firms to hire new workers, especially young people.



One of the changes is an about-face from a measure passed just last year, which gave companies tax breaks if they turned temporary employees into full ones. Temporary workers make up nearly a third of the Spanish work force and were the first to be let go when the economy tanked.



Labor Minister Valeriano Gomez said the policy approved last year is not working, as companies simply roll over temporary contracts as long they can then fire people when they expire. So the government is suspending for two years a rule that says companies have to make permanent employees of people it has had on temporary contracts for two years.



"At times of crisis, the important thing is to keep people working, no matter what, be it with a temporary job or an open-ended one," Gomez said. "We prefer someone to have a temporary job rather than be jobless."



The government also raised the eligibility age for apprentice contracts that give companies tax breaks and broadened the power of a government agency that helps companies make severance payments for layoffs. It also extended special aid of (euro) 400 ($580) a month to jobless people whose benefits have run out, so long as they are undergoing job training.



Concerns that Spain could not handle its debt saw its borrowing rates rise this year to the point that the European Central Bank was forced to intervene in markets in August to buy bonds and bring the rates back down.



On the constitutional amendment, the 0.4 percent deficit limit breaks down into 0.26 percent for the central government and 0.14 percent for Spain's regional governments, many of which are struggling with high debt. Local governments in Spain, many of them also burdened by heavy borrowings, will be required to balance their budgets.



The 0.4 percent limit will be up for review in 2015 and 2018.



Spain as a whole aims to bring its deficit down to 6 percent of GDP this year from 9.2 percent in 2010, with the ultimate goal of hitting the EU limit of 3 percent in 2013.



Prime Minister Jose Luis Rodriguez Zapatero's proposal to change the constitution was not without controversy. Some officials in his own party complained that such a move made the Socialist party seem too economically conservative and beholden to markets and authorities in Brussels.

AP

Start your day with The Independent, sign up for daily news emails
News
Sir David Attenborough
people
Life and Style
Young girl and bowl of cereal
food + drink
News
Comic miserablist Larry David in 'Curb Your Enthusiasm'
peopleDirector of new documentary Misery Loves Comedy reveals how he got them to open up
Arts and Entertainment
Henry VIII played by Damien Lewis
tvReview: Scheming queens-in-waiting, tangled lines of succession and men of lowly birth rising to power – sound familiar?
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
football
Arts and Entertainment
'The Archers' has an audience of about five million
radioA growing number of listeners are voicing their discontent; so loudly that even the BBC's director-general seems worried
News
i100
Arts and Entertainment
Ready to open the Baftas, rockers Kasabian are also ‘great film fans’
musicExclusive: Rockers promise an explosive opening to the evening
Life and Style
David Bowie by Duffy
fashion
Arts and Entertainment
Hell, yeah: members of the 369th Infantry arrive back in New York
booksWorld War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel
News
advertisingVideo: The company that brought you the 'Bud' 'Weis' 'Er' frogs and 'Wasssssup' ads, has something up its sleeve for Sunday's big match
Arts and Entertainment
tv
News
i100
Environment
Dame Vivienne Westwood speaking at a fracking protest outside Parliament on Monday (AP)
environment
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Tradewind Recruitment: English Teacher

Negotiable: Tradewind Recruitment: This post arises as a result of the need to...

Tradewind Recruitment: Class Teacher Required ASAP In Uminster

£120 - £150 per annum: Tradewind Recruitment: I am recruiting on instruction o...

Ashdown Group: Head of Finance - Financial Director - London - £70,000

£70000 per annum: Ashdown Group: Head of Finance - Financial Controller - Fina...

Ashdown Group: Marketing Executive - Wimbledon, SW London

£24000 - £28000 per annum + benefits: Ashdown Group: Marketing Executive - Wim...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness