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Zapatero calls off meeting with builders over cuts

Source: Reuters - Tue 17th Aug 2010

Spain's prime minister has called off a meeting planned for Wednesday with leading firms in the country's struggling construction sector and no new date has been set, a government spokesman said on Monday.

"The meeting has been postponed indefinitely," the spokesman said, after sector sources had earlier revealed details of the event proposed by Public Works Minister Jose Blanco.

Infrastructure cuts and tardy payments from indebted public entities were thought to have been on the agenda, according to an industry source. Construction industry lobby group Seopan says the sector accounts for 10 percent of Spain's economy.

Pressure on Prime Minister Jose Luis Rodriguez Zapatero from the construction sector has been mounting in recent weeks after the government announced plans to cut 6.4 billion euros from infrastructure spending.

Construction companies have also aired concerns that some highly indebted town halls have been late in payments for work or services provided. On Sunday El Pais newspaper reported that Spanish town halls owe construction companies 3.5 billion euros in outstanding payments.

Last week the government said it would reopen around 500 million euros worth of public works that had been shelved under an austerity drive as the government aims to slash the budget deficit to the European Union's ceiling of 3 percent of GDP by 2013, from 11.2 percent of GDP in 2009.

Construction stocks pared earlier gains fuelled by positive reaction to news of the meeting, but still bucked a 0.73 percent drop on the .IBEX share index.

OHL rose 0.05 percent to 19.01 euros by 1405 GMT, FCC was up 0.26 percent at 19.23 euros and Ferrovial added 2.88 percent to 6.33 euros.

Economists argue Madrid has little spare cash to support the construction sector - which has struggled since a property boom evaporated - while growth remains weak and unemployment stands at 20 percent. They say the government should focus on slashing its public deficit, which the government maintains is its number one priority. European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo was quoted last week as saying Spain would have to make extra budget cuts in 2011.

Construction companies, however, argue that the sector is still an essential contributor to the economy and projects cannot be turned off overnight.

Construction lobby Seopan called for government support for the sector in July, and said cuts could mean the loss of more than 115,000 jobs.

In an interview on Sunday, infrastructure minister Blanco reopened the debate about possible higher taxes, which he said were necessary if the country wanted better infrastructure.

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