In a much warranted move, Spain's government and opposition have agreed to clear a constitutional limit on public sector borrowing, thereby sending peace signals in the European countries.

The move was triggered when the Spanish parliament decided to trim down the deficit to 6% of economic output this year, from 9.2% in 2010. Recently, Spain had been in news for being at a risk of near default, and had the European Central bank not intervened, it was possible that Spain could have asked for a bailout.

These speculations have jolted the market to an extent that yields on the government bonds were on a record high. However, the prime minister defended by claiming that Spain's borrowing costs in markets last month compared with Germany's was not justified.

With this, the government would have to maintain a balanced budget, and even a close look will be kept on the total amount of debts.

Reacting to the news, Spain's Prime Minister, Jose Luis Rodriguez Zapatero said: "It represents a step toward strengthening confidence in the medium and long term stability in the Spanish economy”.

The constitutional amendment would not have been possible with the support of the opposition leader Mariano Rajoy, who is of the opinion that it should have been done earlier.