New constitutional rule hopes to balance Spain's budget
Spain announced a new constitutional rule on balanced budgets Wednesday, which will allow the country to go into the red during crisis situations. The law aims to reassure sceptical financial markets in light of recent instability in Spain.
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The reform, which Spain’s government hopes to pass before the 20 November general elections, largely reflects the country’s existing law on budget stability.
Finance Minister Elena Salgado told radio station Cadena Ser that the reform will ensure that the budget ends with a very small or no deficit. It will also allow for flexibility “so that when there is a serious economic crisis or when there is a natural disaster, the budget can end with a deficit.”
The amendment was announced at an extraordinary session of parliament on Tuesday by Prime Minister Jose Luis Rodriguez Zapatero. It covers both the annual budget deficit and accumulated debt, and has been supported by Spain’s Socialist government as well as the opposition conservative Popular Party.
Germany welcomed the amendment on Wednesday as a positive example for other debt-stricken eurozone countries.
Earlier this month, German Chancellor Angela Merkel and French President Nicolas Sarkozy encouraged eurozone countries to adopt a “golden rule” for 2012, which would require governments to balance their budgets.
Germany has already adopted a balanced budget law and said this week that it plans to balance accounts by 2014. France is planning for a similar provision.
Eurozone states have faced massive budget deficits in recent months, with debt overhangs reaching far beyond the EU ceiling of 3.0 percent of gross domestic product.
Spain is hoping to cut the public deficit to 6.0 percent by the end of the year, down from 9.2 percent in 2010. It strives to attain the EU target of 3.0 percent by 2013.
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