Spain's main political powers have agreed to amend the constitution to make the government legally obliged to keep its deficit low, an effort to reassure markets that the country will retain a hand on its troubled finances and not need a bailout. The ruling Socialists and the center-right Popular Party cut a deal in the early hours of Friday, after frantic negotiations, to propose a law under which, starting in 2020, the national deficit cannot surpass 0.4 percent of GDP. That threshold can be surpassed only in cases of natural disaster, economic recession or other extraordinary circumstances that will have to be declared formally by a vote in Parliament. The Constitutional amendment is expected to be voted on Sept. 2 in the lower house of Parliament, while the actual law is due to be passed by next summer. Antonio Hernando, a Socialist party official helping with the campaign for general elections in November, called the accord “positive for the Spanish economy, for trust in our institutions. ” The government is in a rush to pass the constitutional amendment, both to shore up market confidence and because Parliament will break up in the end of September ahed of general elections on Nov. 2. Spain insists it is not acting under pressure from European authorities, even though French President Nicolas Sarkozy and German Chancellor Angela Merkel last week called for all eurozone nations to enact constitutional amendments requiring balanced budgets. Spain is struggling to recover from nearly two years of recession prompted largely by the collapse of a real estate bubble. The jobless rate is near 21 percent and economic growth remains weak.
