Spain's major political parties, the Socialist Workers' Party (PSOE) and the Popular Party (PP) [official sites, in Spanish], reached an agreement on Friday to modify the country's constitution with provisions [text, PDF] that will regulate the limits of the national deficit in order to avoid risks of debt crisis and a bailout. The proposed amendment, to take effect in 2020, will prohibit Spain's national deficit from surpassing more than 0.4 percent [El Pais report, in Spanish] of the nation's gross domestic product (GDP). The law requires that Spain maintain a budget that will remain within the deficit margins established by the EU. The benefits of the changes, developed as a direct attack against Spain's struggles during the last two years of the recession, were described by the parties as guaranteed fiscal responsibility, a revitalized economy and a sustained public welfare system. Although the proposed law does not specify definite limits, the government will only be able to exceed the national budget in times of natural catastrophes, national emergencies and another economic recession. Parliament is expected to vote on the amendment on September 2. The actual law is expected to be passed by July 2012.
A fear of a bailout has caused several European nations to make moves to avoid a major debt crisis. Italy and Spain succeeded in lowering its borrowing costs by taking advantage of a European bond-buying [Houston Chronicle report] program. Earlier this month, Sweden resolved to protect its banking and financial institutions [The Local report] from effects of the debt crisis by increasing funds for more financial inspections and deposit guarantees. In June, Greece, still suffering from its economic crisis [BBC backgrounder], proposed a constitutional referendum [JURIST report] aimed at eliminating the systemic governmental inefficiency and waste that led to the crisis.