Spain's draft budget clears first hurdle in fragmented parliament

MADRID (Reuters) - Spain's minority leftist government came a step closer to passing the country's first budget since 2018 on Thursday after mustering enough support in the deeply fragmented parliament to take the bill through to a second stage of debate.

By 198 to 150 votes, the lower house rejected the opposition's proposal to send back the draft budget submitted by the government in October.

Designed to support economic recovery after a record recession caused by the COVID-19 pandemic, the budget entails record spending on health and social care, a hike in infrastructure investment, and will also serve as an instrument to distribute billions of euros of EU rescue funds.

But the bill faces many more hurdles before it can be approved and signed into law as political parties can now propose detailed amendments to its contents, which can sometimes number several thousand.

Budget Minister Maria Jesus Montero called on her fellow lawmakers to overcome their ideological differences to support the plan.

"We are facing an extraordinary moment in this country that requires an unprecedented response," she said in parliament.

Spain's tourism-dependent economy is set to contract 11.2% this year before rebounding a projected 7.2%-9.8% in 2021, while 3.8 million people are out of work. A government furlough scheme is supporting a further 600,000.

After receiving the backing of a broad spectrum of political parties, the government has plenty of options to negotiate, even though the main conservative opposition People's Party (PP) and the far-right Vox roundly rejected its proposal.

"Depression, waste, debt, deficit, unemployment and skyrocketing taxes are the summary of what this government has brought to the table," PP leader Pablo Casado said shortly after the vote.

Under the current proposal, the government plans to raise taxes on large companies and high earners to boost revenues by 6.8 billion euros in 2021, giving it more ammunition to spend its way out of the recession.

(Reporting by Nathan Allen and Belén Carreño, editing by Andrei Khalip and Bernadette Baum)