THE SPANISH GOVERNMENT has reached an agreement with the country’s main opposition party to constitutionally limit its public deficit and debt, effectively enshrining the principle of budgetary discipline.

The constitutional amendment, which does not include specific deficit cap figures, will go alongside a law which will take effect in 2020 and will limit the country’s structural deficit at 0.4 per cent of gross domestic product (GDP), Reuters reports.

Spain has been the subject of concern amongst Eurozone countries, owing largely to its deficit, one of the highest in the economic area and which is expected to come in at around 6 per cent of GDP by the end of 2011.

Under the terms of the agreement, the Wall Street Journal reports that the central government’s structural deficit cannot exceed 0.26 per cent of GDP, whilst for regional governments it cannot pass 0.14 per cent.

The law – drafted by the government of Prime Minister Jose Luis Rodriguez Zapatero and agreed to by the opposition Popular Party - needs to be passed by June next year. The deficit limits can be revised in 2015 and 2018 if deemed necessary, the paper adds.

The move to limit deficits follows calls from the Eurozone’s two largest members France and Germany to set such obligatory measures.

The amendment, only the second since the end of the Franco dictatorship in 1978, will not set a specific deficit figure, giving Spain greater economic flexibility in times of crisis.

Constitutionally limiting budgeting deficits has been discussed as a possible reform to the constitution in Ireland.

It would require a referendum but appeared to be welcomed by the Minister for Finance, Michael Noonan, recently.

He said last week: “There’s merit in the argument that the people should have in the constitution a protection against future reckless governments.”