Spanish Business News

Spain's government and opposition have agreed to pass a constitutional limit on public sector borrowing.

Last week, the French and German leaders called for all eurozone governments to introduce such a limit to help contain the euro debt crisis.

The move came as the Spanish parliament discussed further austerity designed to cut the deficit to 6% of economic output this year, from 9.2% in 2010.

The prime minister has attacked market fears over Spanish borrowing.

Jose Luis Rodrigues Zapatero and the leader of the main opposition People's Party spoke in favour of the proposed constitutional amendment.

The prime minister and Socialist party leader told parliament that the rise in Spain's borrowing costs in markets last month compared with Germany's was not justified.

Spain's economy was growing, despite the market volatility, but the turbulence threatened to exacerbate the country's economic crisis, he said.

However, financial markets provided some relief on Tuesday, with the cost of borrowing at a three-month treasury bill auction falling to 1.357% at an annualised rate, from 1.899% previously.

Borrowing costs for Spain and other heavily indebted eurozone governments have fallen sharply in the past two weeks after the European Central Bank's decision to start buying up Spanish and Italian debts.

Expectations that interest rates will be kept low by the ECB in response to a slowdown in the eurozone economy have also helped.

Source: BBC News