March 7, 2021

Spanish Leaders Back Constitutional Amendment to Limit Debt

The measure is designed to calm markets that have been concerned about Spain’s ability to stick to its budgetary targets, particularly because of excessive spending by regional authorities.

Having secured the backing of Mariano Rajoy, the leader of the Popular Party, the main center-right opposition, Mr. Zapatero hopes lawmakers will vote on an amendment in the coming month. It could be one of the final legislative changes introduced by his government before a general election on Nov. 20.

Mr. Zapatero has been governing without a parliamentary majority, while Mr. Rajoy’s party is ahead in opinion polls, having won in regional and municipal elections last May.

During a specially convened session of Parliament, Mr. Zapatero’s government also won backing for further budgetary measures designed to yield almost €5 billion, or $7 billion, in additional revenue this year. The revenue will be almost evenly split between corporate tax payments, which will be brought forward, and a reduction in state health spending by promoting the use of generic drugs.

Spanish lawmakers, recalled early from their summer vacations, also signed off on a proposed cut in value-added taxes on home purchases that was announced Friday. Unsold housing has been one of the major problems facing the country’s banking and real estate sectors.

Mr. Zapatero told lawmakers that the government would present a new plan this week to stimulate youth employment, including an increase in job training subsidies. The government will also extend by a further six months a subsidy of €400 a month for jobless people who have already reached the end of their regular unemployment compensation period.

The measures come as Spain’s fragile economic recovery has shown signs of already running out of steam. Gross domestic product grew only 0.2 percent in the second quarter despite stronger exports and a tourism sector that has rebounded to pre-crisis levels, thanks in part to reduced competition from politically troubled countries in North Africa.

Spain paid sharply lower interest rates in the bond market Tuesday, selling €2.14 billion in six-month bills, with a yield of 2.2 percent compared with 2.5 percent at the previous auction, on July 26.

It also sold €805 million in three-month bills with an average interest rate of 1.4 percent, down from 2 percent in July.

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