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Spain's parliament approves biggest budget in country's history

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AFP/The Local - [email protected]
Spain's parliament approves biggest budget in country's history
Spain's Prime Minister Pedro Sanchez smiles on his seat as he takes part in the Government's question time session prior to voting an extension of the state of emergency amid the coronavirus outbreak in Madrid on June 3, 2020. - The government will seek parliament's approval to extend Spain's state of emergency one final time, which would keep the coronavirus lockdown in place until June 21. (Photo by DANI DUCH / POOL / AFP)

Spain's fragmented parliament passed the government's 2022 budget on Thursday, boosting the stability of Socialist Prime Minister Pedro Sánchez's minority coalition government.

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Lawmakers voted 188-158 in favour of the budget, which includes a record €240 billion ($340 billion) in spending next year as the government seeks to spur activity in an economy badly hit by the coronavirus pandemic.

It includes €27.6 billion from the European Union's economic recovery fund.

Spain is one of the main beneficiaries of the fund, with the country set to collect a total of €140 billion in grants and loans from it over six years.

In a tweet sent just after the budget was approved, Sánchez said the spending plan will "spur the recovery and the modernisation of our country".

The approval of the new budget secures the survival of government until the end of its mandate in late 2023 since if Sánchez's administration lacks support for a budget next year, it can extend the 2022 spending plan for another year.

By contrast neighbouring Portugal will hold early elections on January 30 after parliament earlier this month rejected the minority Socialist government's 2022 budget bill.

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Sánchez's Socialists and its junior coalition partners, hard left party Podemos, hold only 155 of the 350 seats in Spain's highly fragmented parliament.

But the government struck deals with smaller, regional parties to secure their support for the budget, including one with Catalan separatist party ERC that sets a quota for regional languages on streaming platforms like Netflix.

Sánchez is betting the expansive budget will stoke an economic rebound that has lost some momentum due to weak domestic consumption and a slower than expected recovery in its key tourism sector, and prop up his approval ratings which have dipped.

Among the measures financed by the budget is a payment of €400 to all those who turn 18 to spend on cultural activities, and a monthly rent subsidy of €250 for low-income youths.

READ MORE: Spain to give young mid-income earners €250 monthly rental allowance

Civil servants will get a 2.0 percent pay increase while old-age pensions will be increased in line with inflation.

The budget sees Spain's public deficit to fall to the equivalent of 5.0 percent of Spain's economic output next year, down from 8.4 percent in 2021.

But it is based on a prediction that Spain's gross domestic product (GDP) will expand by 7.0 percent next year, a forecast many analysts say is unrealistic.

Spain's economy contracted 10.8 percent in 2020, one of the worst results among industrialised countries, as pandemic travel restrictions crippled its tourism sector.

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