Brussels gives Spain a wake-up call

The priorities must be to reduce the deficit, to undertake more reforms in the labour market, to complete the banks’ restructuring and to approve further liberalisation in the service sector. The wake-up call to Spain is, in any case, much milder than in previous years. Brussels welcomes the steps taken by the Spanish government in many areas, but maintains there are some imbalances (such as high unemployment and private debt) that require ‘decisive reforms.’

 

As always, the main task is control of the public deficit.  The latest forecasts from both the Commission and private analysts predict breaches of this target, mainly due to deviations from the autonomous communities. Brussels reminds of the unavoidable need to reduce the deficit below 3% in 2016. But this will not be an easy task considering that 2015 is a year with several electoral calls and so more prone to public spending.

 

With regard to the labour market, the Commission proposes a series of reforms to try to reduce the overwhelming unemployment rate (23.8%): the alignment of wages and productivity (which does not really coincide with the recent agreement between the employers’ association and the unions), fostering regional mobility and establishing specific measures to tackle youth unemployment.

 

In the the banking sector, Brussels highlights the necessity of completing the reform of the savings banks. But it also flags the need to finish the restructuring and privatisation of state owned banks. On this last point, President Rajoy has said the state will privatise Bankia when market conditions improve.

 

As far as pending reforms are concerned, Brussels draws attention to some proposals which the government never manages to tackle. For instance, liberalisation in the service sector, of regulated professions and in professional services.