Madrid: Spain's deepest budget cuts in 30 years may be just the start of an about turn by Prime Minister Jose Luis Rodriguez Zapatero that's already sent his popularity plunging and prompted calls for a general strike.
As parliament in Madrid debated the first wave of cuts yesterday, his minority administration was preparing the ground for further measures that his traditional Socialist allies may oppose.
After cutting civil servants' salaries by five per cent, the government said it planned to rein back some of the best worker protection in Europe and raise the retirement age.
Zapatero's latest steps to reduce the euro region's third-biggest deficit won applause from the International Monetary Fund as the government tries to reassure investors that Spain can avoid the same fate as Greece.
While smaller parties had refused to guarantee support for those measures in yesterday's vote, the risk for Zapatero was that he'd struggle to push through further cuts.
"He's convinced he has no political future if he doesn't go with the reforms, but it's not obvious that he has a political future with the reforms," said London School of Economics professor Luis Garicano. "Some of the things he still needs to propose will create trouble. But he has to push them."
At least three Socialist lawmakers refused to join the rest of the party in a standing ovation when Zapatero first announced the cuts on May 12 and the opposition, pro-business People's Party said it would vote against them yesterday. With 169 seats in Spain's 350-member assembly, Zapatero's Socialists are seven short of a majority and pass legislation on a vote-by-vote basis.
Polls indicated overhauling the pension system, which the IMF has said needs "bold" changes soon, looks difficult.
Political turmoil
- 33.7%: fall in support for the Socialists
- 20%: is Spain's unemployment rate — highest in EU
