Spain's main political parties agree to set deficit, debt limits for 2020

Spain’s two main political parties agreed to enshrine the principle of budget discipline in the constitution and gave themselves until next year to set specific deficit goals for 2020.

The ruling Socialist Party and opposition People’s Party agreed to amend the constitution to ensure all arms of government stick to the “principle of budget stability,” according to the text of an amendment distributed by the Socialists on Saturday.

The amendment calls for public debt not to exceed 60 percent of gross domestic product, though the ceiling may be breached in the case of “natural catastrophe, economic recession or emergencies.” The parties pledged to pass a separate law by June next year that will set a maximum structural deficit of 0.4 percent of GDP to be met by 2020, the same year the debt limit comes into effect.

“We want to be part of the core of countries at the vanguard of what is going to be the new European economic policy,” Soraya Saenz de Santamaria, the PP’s spokeswoman in Parliament, told reporters in Madrid on Saturday.

“With this agreement Spain is backing the euro.”

Prime Minister Jose Luis Rodriguez Zapatero, fighting a surge in borrowing costs that prompted the European Central Bank to start buying Spanish debt, is following similar plans by Germany, France and Italy to enshrine budget discipline in national constitutions. The proposal has prompted criticism from within Zapatero’s party three months before a general election that polls indicate it will lose.