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
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
ebooks
ebooksA special investigation by Andy McSmith
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
  • Get to the point
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

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own