Zapatero's last-minute doubts on budget reform

An hour before the session of Congress in which he announced the second reform to the Spanish Constitution since 1978, José Luis Rodríguez Zapatero was still hesitating. Aides say that the prime minister also considered the option of simply making a statement supporting the introduction of an article on budget stability into the charter, but leaving the actual drafting for after the general elections of November 20.

In the end, the tremendous market instability experienced in August, when Spain's risk premium shot up to 400 basis points, convinced the Socialist that he had to send out a powerful message about the country's commitment to financial solvency.

This new reform - the first one took place in 1992 to codify the Maastricht Treaty - will get passed in record time: less than 15 days after being announced. Its preparation was also very quick. Its origins lie in July 21 European summit, when EU leaders approved a new Greek bailout and encouraged member states to implement new rules on fiscal stability.

Germany had already introduced the concept in its own constitution, while France is working on it and Italy said it would, too. Zapatero, said aides, felt that Spain should be a part of this process and join other members making major decisions aimed at greater European unity.

An added problem for the Spanish government was a lack of time, since Zapatero has called early elections and is set to dissolve parliament in late September. But, said one aide, "when you've participated in the overnight approval of a 500-billion-euro rescue fund, or decided on a tough adjustment on another night, you're ready for a constitutional reform in a short space of time if the situation requires it."

A key factor that encouraged Zapatero to announce the reform was support from the opposition Popular Party (PP). Shortly before the congressional session of August 23, he talked with PP leader Mariano Rajoy, who confirmed that the conditions were very favorable for an agreement on a deficit ceiling.

"He increasingly saw that just a statement of intentions was going to be a watered-downed decision, considering the situation. On the contrary, initiating the [constitutional] reform could have a very positive impact on Europe and the markets, much more so with the support of the main opposition party," says one well-informed source.

Zapatero also consulted with the new Socialist candidate to succeed him in La Moncloa, Alfredo Pérez Rubalcaba (until recently interior minister and government spokesman). Rubalcaba influenced the decision in that he opposed introducing specific deficit figures into the constitution, and instead convinced Zapatero to leave the specifics to an organic law, which is easier to amend.

In fact, both Zapatero and Rajoy were in favor of setting a deficit ceiling of 0.35 percent for 2020, and for that figure to be included in the new constitutional article. But sources say that Rubalcaba, who led the negotiations, managed to convince both leaders to extend the limit to 0.4 percent and to leave it out of the charter.