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Spain passes wealth tax to cut deficit

Spain's Parliament restored a deficit-reducing wealth tax in its final session before dissolving to make way for an election that opposition conservatives are favored to win.

Most opposition parties criticised the tax bill as a desperate electoral maneuver by the beleaguered ruling Socialists, who argue it is only fair to hit the rich harder in times of crisis, highlighted by Spain's 21 percent jobless rate.

Still, there were only two votes against the new tax for no party wanted to be seen as coddling the wealthy in an election year. The yes votes totaled 176 — most from the Socialists — while 166 deputies abstained.

The government says the tax will affect 160,000 people whose net worth is more than €700,000 ($950,000). It will run for only two years — 2011 and 2012 — to bring in €2 billion ($2.7 billion) just as Spain needs it the most as it works to cut its deficit from 9.2 percent of GDP last year to the EU limit of 3 percent in 2013.

The net worth threshold is roughly seven times the one in a law the the same government suspended in 2008. At the time, the economic crisis was just starting to bite hard and the government argued that the tax — a levy on a person's assets minus their debts — hit the middle class too hard.

Parliament will formally dissolve Monday to allow time for campaigning for Nov. 20 general election. Debate will be dominated by the staggering jobless rate, anemic growth and debt woes that prompt worries Spain might still need an international bailout.

The opposition Popular Party, which is favored to win the election, said the Socialists have left a major piece of business undone: a decree extending this year's budget numbers into 2012, since there will not be time to pass a new budget for 2012 by the Dec. 31 deadline.

The conservative party said this shows the Socialist government wants to avoid debating the public finances and acknowledging during an election campaign that its growth forecasts — 1.3 percent GDP growth this year — are too optimistic. The European Union, the International Monetary Fund and many private economists have issued lower forecasts.

"They do not want to acknowledge the inconsistency of their predictions," said Soraya Saenz de Santamaria, a Popular Party spokeswoman.