Responding to deep international criticism of Spain’s budget deficit, Prime Minister Jos Louis Rodriguez Zapatero today announced his intention to seek a constitutional amendment that would require future governments to maintain a balanced budget, and would set limits on public sector borrowing.
Just a few days ago Germany and France together called for all Eurozone countries to adopt balanced budgets and cap spending as a percentage of GDP to avoid repeats of the current financial crisis facing the Euro.
Today’s announcement has broad political support, with Mariano Rajoy the opposition leader stating his intention to help push through the 60% majority vote needed in parliament to change the constitution.
If passed the new measures are intended to boost confidence in Spain by the international financial community, and will be a significant reform as Spain battles reduced ratings making borrowings more expensive.
As well Zapatero announced that Friday will see further steps to reduce Spain’s high unemployment rate with changes to temporary employment contracts and additional funding for industry training to be allocated.
Low quarterly growth rates in the Spanish economy, with third quarter growth estimated at 0.2%, have however been welcomed, and with recent austerity measures expected to save an additional 5 billion euros in 2011, the government is cautiously optimistic the worst of Spain’s financial woes may soon be over.