Spain Socialists reach deal to pass crucial budget

Spain's minority Socialist government has agreed to give a Basque regional party more control over some local issues in a deal it hopes will smooth approval of its crucial 2011 budget through parliament.

The government is due to unveil its toughest budget proposals in 15 years on Friday as it attempts to reassure markets it can meet hard deficit cutting targets, even as its economy struggles.

The Socialist administration is seven seats short of a majority in the lower house of parliament and needs the support of the Basque National Party (PNV) and other centre-right parties to get the budget through.

PNV, with six legislators, said it will receive 472 million euros to manage employment in its region in 2011 and control over job training and placement services for the unemployed as part of the deal struck with the government on Wednesday.

The government is still trying to close agreements with other political parties to ensure backing for the budget, the parliamentary spokesman of the ruling Socialist party told reporters on Wednesday.

Analysts expect the Socialists will garner enough support, but if it unexpectedly fails to gain sufficient backing, Spanish Prime Minister Jose Luis Rodriguez Zapatero could face a no-confidence vote and early elections, although his ministers rule out that happening.