Spanish Prime Minister proposes a constitutional amendment to include deficit and debt limitations for all public administrations

Barcelona (ACN).- Going beyond what German Chancellor Angela Merkel and French President Nicolas Sarkozy were asking for, Prime Minister, José Luís Rodríguez Zapatero, proposed to include on the Spanish Constitution a deficit and debt limitation affecting all public administrations in the country. Zapatero, from the Socialist Party (PSOE), proposed the amendment in front of the Spanish Parliament during the debate to approve the fiscal measures announced last week to save 5,000 million euros this year. The constitutional amendment was backed by Mariano Rajoy, the leader of the main opposition party, the Right-Wing People’s Party (PP). Despite agreeing on the principle of keeping public spending under control, Catalan parties are cautious in front of an agreement between Spain’s two main parties, as some fear it could include centralist measures and thus reduce Catalonia’s self-governance. The spokesperson of the Catalan Government, Francesc Homs, quickly reacted to Zapatero’s announcement and asked all the Catalan parties to frontally oppose the measure as it could trim “Catalonia’s fiscal autonomy and thus its self-governance”. Other Catalan politicians were less straightforward and said to be open to discussion. Besides Zapatero’s proposal, the Spanish Parliament approved the fiscal measures announced on Friday by the Spanish Government that will save 4,900 million euros this 2011. The measures focus on the VAT for new housing purchase, generic drug prescription and corporate tax for large companies.

Josep Antoni Duran i Lleida, the Spanish Parliament’s spokesperson for the Centre-Right Catalan Nationalist Coalition ‘Convergència i Unió’ (CiU), which runs the Catalan Government, said to share the principle of budget stability and public spending control. However, coinciding with the Catalan Government’s spokesperson, he said he wanted to “look at the small print” before giving his group’s support. Duran i Lleida thus showed some caution, fearing that the PSOE and the PP could use the need for this budget stability measure to write the amendment in a way that could dramatically trim Catalonia’s self-governance. Joan Tardà, the Spanish Parliament’s spokesperson for the Left-Wing Catalan Independence Party (ERC), stated that “each time PSOE and PP agree on something, in Catalonia we start to fear”.

Catalonia’s Opposition leader, Joaquim Nadal, from the Catalan Socialist Party (PSC) that supports Zapatero, was far more moderate. Nadal said that limiting the debt was “a reasonable measure” to adopt for “budget discipline”  in the current times. However, Nadal stressed two conditions, he would agree if the debt and deficit limitation does not put the Autonomous Community funding scheme in jeopardy and if all public administrations are included. He also accused Homs of asking for the PSC vote against the proposal when the details are still unknown.

Zapatero’s proposal was vague

Zapatero did not go into details regarding his proposal when he announced it in front of the Spanish Parliament this Tuesday morning. He simply talked “to limit deficit and debt of all public administrations” within Spain through an amendment to the Spanish Constitution. He is also said to have already talked to Rajoy before the parliamentary debate, as well as to the Socialist candidate to the next Spanish elections, Alfredo Pérez Rubalcaba, as way of showing that the two main parties (PSOE and PP) were sharing this objective. Zapatero asked other groups to join “this consensus […] to transform it into the largest possible consensus”. The President of the Spanish Parliament, José Bono, announced that the amendment could be debated in the coming days through an urgent track. As it already counts with the votes from the PSOE and the PP it would thus be approved next September, before the next Spanish elections scheduled on November 20^th.

New fiscal measures approved

The Spanish Parliament approved the measures announced last Friday by the Spanish Government. The measures can be divided in three. Firstly, the VAT on the purchase of new built flats will be halved, passing from 8% to 4%, in order to boost the sector. It will be in place the rest of 2011 and the entire 2012. This measure was welcomed by the construction industry, as well as by the main opposition party the People’s Party, which said it will extend it to 2013. Secondly, corporate tax payments of companies with more than 20 million euro annual turnouts will have to be advanced. The measure does not affect the tax base and rate, but it directly has an impact on companies’ cash provisions. This particular measure was not backed by the Right-Wing parties. Finally, the last measure is that doctors will be obliged to prescribe medicine’s active principal, and not the drug’s commercial brand, while chemists will have to offer the client the possibility to buy the cheapest one. Since the three measures were voted together, the People’s Party, CiU and the Basque Nationalists abstained. The measures were thus just approved with the simple majority of the Socialist Party’s votes.