Spain's austerity

In a shaky victory for Spain's prime minister, the Spanish parliament passed a 15-billion euro ($18.5 billion) austerity package Wednesday with a one-vote majority, averting a government collapse but raising questions over its ability to bring the country out of its economic crisis.

Prime Minister Jose Luis Rodriguez Zapatero's governing Socialist Party passed the bill 169 to 168, with all other parties either voting "no" or abstaining. Analysts had feared that a defeat of the bill would have forced new elections and thrown Spanish markets further into instability.

The austerity package contains an average pay cut of five percent for all public sector workers beginning in June and a pay freeze in 2011. In what appears to be an attempt to improve his government's dropping popularity, Zapatero also plans to announce a new tax on the country's wealthy.

"These measures are painful but essential," Finance Minister Elena Salgado told parliament.

Pressure from EU

Spain had already passed a 50-billion euro austerity plan in January that aimed to cut its deficit to the European Union's limit of three percent of gross domestic product, well below last year's 11.2 percent deficit.

Greece, Portugal and Italy are among other eurozone countries to have passed austerity measures, often resulting in protests and strikes.

The cuts were met with praise from abroad, with German Finance Minister Wolfgang Schaeuble calling them "severe" but necessary.

"We can only achieve durable stability of the euro if each eurozone member contributes to structural measures," he said.

Unions plan strike

Public sector workers' unions have announced plans to strike on June 8, and Spain's largest trade union, the CCOO, said a national strike was also likely.

Ignacio Fernandez Toxo, the CCOO's leader, said the austerity measures would hamper economic growth, "hindering economic recovery and probably generating an increase in unemployment."

On top of the austerity package, the government is also in three-way negotiations with business leaders and unions on a reform of the country's strict labor laws, which analysts say are hurting the country's competitiveness.

Toxo said there was "still a big difference" between the positions of unions and businesses, but that they wanted to continue negotiations anyway, even if they missed the government's end-of-May deadline.

Spain's unemployment rate is the highest in the EU, at more than 20 percent.

acb/AFP/Reuters
Editor: Rick Demarest