Spanish Prime Minister Jose Luis Rodriguez Zapatero and his political opponents in parliament have agreed to work together to quickly change Spain’s constitution and put a legal limit on how much the government can borrow.
It is part of moves by Madrid to prove to nervous financial markets they can control their finances. The plan is to change the constitution before elections in November.
Prime Minister Zapatero said: “This initiative has the same purpose as the other measures already announced. The aim is to reinforce our commitment to a definitive consolidation of the economic and monetary union and strengthen confidence in the Spanish economy in the near and long term.”
The move comes in response to a call last week by French President Nicolas Sarkozy and German Chancellor Angela Merkel for all euro zone nations to enact constitutional amendments requiring balanced budgets.
Zapatero was in parliament to talk about that and explain five billion euros of spending cuts this year, as part of the attempts to get the deficit down to six percent of gross domestic product from 9.2 percent last year. The EU-mandated deficit limit of three percent of GDP.
Despite agreeing on the need for a constitutional amendment for a debt ceiling, Mariano Rajoy, the leader of the opposition Partido Popular (People’s Party), criticised Zapatero’s austerity measures as just another “sterile” plan to appease the European Union.
“You have come again to give another packet of mixed measures which are more directed as a gesture towards the European authorities then measures to fight the crisis,” Rajoy told parliament.
Fears that Spain will not be able to repay its debts have pushed up its borrowing costs to unsustainable levels.
But in its latest auction of government bonds Madrid on Wednesday was able to offer lower rates of interest and find buyers.
Average yields on the 3-month bill were at their lowest since March at 1.357 percent, though a long way above yields of around 0.3 percent paid before the euro zone debt crisis began.
It has been helped by the European Central Bank’s recent bond buying programme.