Politics

On Wednesday, Spanish Government President José Luis Rodríguez Zapatero, speaking in Tokyo, acknowledged the importance that the upcoming state budget represented for all parliamentary groups. For this reason, he said, if his government received backing from the Basque nationalist PNV, he would open the way for easier relations with the party in future.

In a meeting with press during an official visit to the Japanese capital, Zapatero refused to talk about a possible deferment of next year''s budget, which would occur in the event that his government''s proposed financial plan for 2011 does not get sufficient support.

The government president revealed that, prior to leaving for Asia, he had called PNV president Iñigo Urkullu in order to reach an agreement over future talks.

During the conversation with Urkullo, various matters were discussed including fiscal reforms for this year''s budget, as well as pensions and laws for a sustainable economy.

However, Zapatero also insisted that his party were entering talks with all politcal groups, citing, in particular, the Canary Islands'' Coalición Canaria and Navarre''s UPN.

Zapatero said he did not believe his negotiations with the PNV will upset lehendakari Patxi López, reminding press that he has discussed, is in discussion and will continue to the discuss the transfer of greater powers to the current Basque Administration.

Deficit down

According to recent figures, Spain''s deficit is down sharply thanks to an unpopular cocktail of tax hikes and other austerity measures - good news for a government fighting to ward off fears it might need a bailout like the one that saved Greece from bankruptcy in May.

The Finance Ministry said in a report Tuesday that through the end of July, the central government''s deficit totaled 2.4% of GDP, half of what it was for the same period of 2009. The report says revenue rose 10.4%&' || 'nbsp; through July, largely due to a higher VAT rate, a tax on goods and services.

But this is a one-off widely attributed to Spaniards rushing to buy big-ticket items like refrigerators and washing machines before those tax rates rose on July 1st.

On the spending side, the government saved money by eliminating a $400 ($500) tax rebate it granted to most taxpayers in 2008 and cutting civil servants'' wages by 5% as part of an austerity plan approved in May.

But other numbers show the uphill battle Socialist Prime Minister Jose Luis Rodriguez Zapatero still faces as he tries to resurrect an economy that collapsed two years ago after a real estate bubble burst and is now saddled with a 20% jobless rate: tax revenue from businesses is down 9.8% in the first seven months of the year.