M a r k   N a y l e r

freelance journalist

home about me selected articles contact

NEWS

FOCUS ON FINANCE

THE EURO ZONE

MARK NAYLER

HIGH PRAISE

December 16th to 27th 2016 ed., p.14

          In order to do that, the PP has announced measures that are, once again, likely to annoy an awful lot of Spaniards and its leftist adversaries in parliament: spending cuts in public administrations worth 900 million euros, increased levies on alcohol and tobacco, an effective hike in corporation tax and an as-yet unexplained environmental tax. Yet if Spain is to avoid a major showdown with Brussels next year, such measures were inevitable.

             Increasing the productivity of Spanish SMEs while reducing the country’s unemployment rates will be no mean feat either. The report acknowledges that Spain’s employment level has been growing more than 3% a year lately and that 1.1 million jobs have been created over the past two years; but it also points out that the majority of these were temporary contracts and that around 60% of unemployed people have been out of work for a year or more. For this situation to improve, the creation of more permanent jobs is required and the long-term unemployed need to be helped back to work - moves which would raise Spain’s productivity levels too. The only hitch is that the corporate sector  faces a drastically increased minimum wage and more taxes next  year, factors that will particularly squeeze Spanish SMEs. Spain’s ‘A’ grade, then, comes with a crucial qualification: “Much more work to be done.

ith a critical EU piling on the pressure for a workable 2017 budget,  it must be a pleasant

               


   
 

relief for Spain to have at least one external body praising its economic efforts. This Tuesday, the International Monetary Fund (IMF) released its annual report on the state of the Spanish economy - and it received an ‘A’. Spain’s GDP expansion, said the report, remains “impressive” and, in a nod to the hugely unpopular austerity measures that defined Mariano Rajoy’s first term - “earlier reforms and confidence-enhancing measures have paid off”.

           Many Spaniards will vehemently disagree with the last claim: those who were casually laid off when Rajoy’s 2012 labour market tweaks enabled companies to fire employees with ease, for example. But the Washington-based IMF is chiefly concerned with macroeconomic statistics, and Spain’s constitute an upbeat narrative. Thirteen consecutive quarters of GDP expansion, unemployment down 8% from its peak, expected economic growth of 3.2% this year and increased consumer spending all indicate that the once-stricken Spanish economy is now definitely out of recession.

      But while the IMF report gives Spain’s Ministry of Economy reason for patting itself heartily on the back, it also points out that a lot of work is required for the country to remain on an upward trajectory. If the Spanish economy is to keep up its current growth rate, the government must “reduce remaining vulnerabilities and structural weaknesses”. How to do this? Easy: “gradual fiscal consolidation”. Unpacked from report-speak, this means Spain must reduce its inflated public debt and high unemployment rate while increasing the productivity of its Small and Medium-Sized Enterprises (SMEs). That’s all, then.

    In addressing its unruly budget deficit, Rajoy’s minority government has already taken the first step in tackling its public debt. Just last week, Spanish budget minister Cristóbal Montoro submitted his revised 2017 budget to Brussels. It seeks to assure a sceptical EU that Spain will take aggressive measures to bring its GDP deficit under control, reducing it to 3.1% of GDP in 2017 from 4.6% this year.

freelance journalist

M a r k   N a y l e r