Why We Don’t Want To Have The “Instruments of Torture” Used in Spain

We may not want the instruments of torture, but if the Spanish government doesn’t do something to change course and restore growth to the economy, they will be applied. This post is just to draw the attention of anyone who might be interested to my new blog on the Spanish newspaper Expansión (in Spanish). The latest post is about why it would be better for Spain’s political parties to get together and take the decisions themselves, rather than wait for the European Monetary Fund to wheel out Herr Schäuble’s “Instruments of Torture”.

I also deal with the arguments the Spanish government presents about growth, and foreshadow today’s ruling by the EU Commission that the forecasts for 2011 and 2012 are way too optimistic.

According to the Commission, the Spanish government forecast that it will be able to slash its budget deficit to 3 per cent of GDP in 2013 from 11.4 per cent last year is based on excessively optimistic growth forecasts for growth of 1.8 per cent next year, 2.9 per cent in 2012 and 3.1 per cent in 2013.

The Commission also pointed to the slow pace of public sector bank restructuring in Spain. It said Spain should take action to improve the long-term sustainability of its public finances, notably by means of a pensions system reform (a point I have addressed separately in this post).

The Stability Programme update of Spain reflects that the current crisis is severely affecting its public finances, with an estimated deficit of 11.4% of GDP for 2009 and a rapidly-rising government debt ratio. The Spanish update aims at sizeable continued fiscal consolidation from 2010 on, with a view to gradually reducing the government deficit to 3% of GDP by 2013 in line with the Council recommendation of 2 December 2009. However, the favourable macroeconomic assumptions after 2010 may imply a lower contribution of economic growth to fiscal consolidation than envisaged and the adjustment path after 2010 would still need to be backed up with measures. Public debt, which stood at below 40% of GDP in 2008, is expected to grow to 55% of GDP in 2009 and swell further to 74% of GDP by 2013. Based on this assessment, the invitations to Spain refer to the specification of the budgetary strategy to correct the excessive deficit and reduce debt, improvements to long-term sustainability and the old-age pension scheme, the fiscal framework and the quality of public finances.

¿Pacto Nacional o herramientas de tortura?

Una de las cosas más curiosas que he observado últimamente mirando la televisión, es que mientras ha habido muchos comentarios relacionados a propósito de poner en marcha un Fondo Monetario Europeo, parece que nadie ha sentido la necesidad de explicar cuáles serán los primeros clientes de esta entidad, ni mucho menos se ha atrevido a nombrar el país que tiene muchos números de encabezar la lista de invitados a la fiesta: el Reino de España.

Semejante lapsos ya lo voy a corregir yo, en este espacio. Es evidente que el nombre de Grecia está en la mente de todos, pero el de España no queda demasiado atrás, ni tiene razones de sentir ningún tipo de envidia por el tratamiento especial que Grecia está recibiendo en estos momentos.
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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

One thought on “Why We Don’t Want To Have The “Instruments of Torture” Used in Spain

  1. Jefe, como se llama su blog? I just went to the blog page of Expansion.com and didn’t see you listed. Could you provide a link or the blog name? I like to keep my spanish up, and am trying to understand reading Spain’s economic pain anyway.