No bright spell for the Spanish economy before June 2013

The 2012/02/13 at 06:50
Valérie Demon, in Madrid

Downtown business district of Madrid (A.R.R.)
Austerity measures alone will not suffice. Growth stimulus remains essential for avoiding economic asphyxia.

2012 is not starting well for Spain. The country's deficit is dangerously close to 8% of the gross domestic product (GDP), far from the 6% that Spain was supposed to reach at the end of 2011. The International Monetary Fund (IMF) and the Bank of Spain envisage a recession in 2012. And the number of unemployed persons is still on the rise: 5.3 million persons are affected, with half of these under 25 years. These figures alarm the country, and above all, Europe. Given such conditions, employers are not abounding in optimism. According to the barometer defined by the Deloitte firm and published by the daily paper El País on the second quarter of 2011 after surveying 279 businesses1, 70% of them do not expect the situation to improve by the second quarter of 2013. It is only from that point onwards that the measures launched by the new rightwing Popular Party government will begin to yield fruit, believe the businesses surveyed.


Meanwhile, the government is looking for solutions. The Spanish executive power announced financial restructuring on Thursday 1 February and details of a reform to the labour market are awaited on 10 February. The financial reform is to force banks and savings funds to increase their funds, to keep away any risk relating to their exposure to the real-estate sector. In this way, financial establishments will need 50 billion euros to make their real-estate assets healthier. Another delicate point is that small businesses are still suffering from delays in payment from regional and local administrative offices. According to Celia Ferrero, 15 billion euros, in other words 4 million invoices, still need to be paid. "At the end of January, we should have paid the semester subscription for the VAT. According to our estimates, small business heads have had to advance 250 million euros though their invoices have not been paid," assures the Vice-President.


The Spanish government committed, before the elections, to delaying all VAT payments as long as invoices were not paid and introduced a law for entrepreneurs by its hundredth day in government. "Austerity policies that demand many sacrifices will only be useful if they are accompanied by economic stimulus support measures – otherwise, we will be asphyxiated," insists Celia Ferrero. Within the Chambers of Commerce, emphasis is placed on a fundamental detail: "if only austerity measures are pursued, we will not grow, it will be unbearable in the long term with almost 24% in unemployment," opines an observer. A complex equation in a country that needs over 2% in growth to create jobs.


1 Billing a total of over 1,000 billion euros and employing more than 1 million persons.






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