Business

Deficit Amendment Passes Spain's Lower House

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Spain's lower house of Parliament approved on Friday a constitutional amendment limiting the country's future budget deficit. The amendment would almost balance Spain's budget by the year 2020. The Senate is expected to vote on the measure next week.

STEVE INSKEEP, host:

And let's go next to Spain, where lawmakers are considering changing their constitution to limit borrowing. The proposed amendment passed the lower house today and has gone to the senate. If it becomes law, Spain's government would have to keep its deficit below one percent of GDP.

Lauren Frayer reports from Madrid.

LAUREN FRAYER: The amendment would almost balance Spain's budget by the year 2020. In Spain, the central government collects most taxes, then distributes the money to local regions to spend.

Gayle Allard, an economist at Madrid's IE Business School, says the measure will help tamp regional over-spending.

Ms. GAYLE ALLARD (IE Business School): When the regions run out of money, basically they just run back to Madrid and say give us some more money. They don't have the kind of spending control that would be imposed if they had to raise their own revenues.

FRAYER: The amendment will allow the government to run a deficit of just 0.4 percent of GDP. Compare that to more than 11 percent just two years ago and six percent forecast for the end of this year. The EU wants deficits below three percent, but Spain has long flouted that rule. Germany and France have grown impatient.

Both Spain's ruling socialists and the conservative opposition have backed the amendment, and it's expected to also pass in the senate next week. But some regional authorities aren't happy, and trade unions are calling for protests. With more than one in five Spaniards out of work, they're worried about stifling any growth.

For NPR News, I'm Lauren Frayer in Madrid.

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