Jobless numbers rise and social security contributors decrease, which means more welfare benefits but less resources. Planned budget cuts will be insufficient to correct the public deficit, as the state’s tax income suffers from a depressed GDP. The fiscal amnesty has been a trick of limited use although it has pushed fraudsters under the spotlight after an era of excessive impunity. “Spain is a great country, and it will surprise us all,” recently said writer Jacinto Rey. We wonder.
But trade balance figures support Rey’s optimism. Indeed, services and goods external trade in September gave Spain a surplus of €8 billion. Domestic consumption has fallen. Yet, an average growth rate of 12.5 percent in exports during the last 33 months is evidence of an important improvement in competitiveness.
Remittances from migrants and debt interest payments are on the upward trend and caused a current account deficit of 0.4 percent of GDP. Capital outflows have reached €216 billion between January and September. The external debt burdens the country’s economy: in 2013, Spain will need €230 billion including refinancing. Debt haircuts and maturity extensions will be unavoidable.
If the euro zone is faithful to its word, Spain will have to receive its needed rescue. The government has implemented most reforms in the electoral programme–pensions being the latest one. The financial sector, though, continues spitting uncertainty: the nature of the savings banks, the end of Bankia, the bad bank Sareb and how it will work…
Austerity impositions will be triggered by the very situation of the Spanish economy rather than Brussels’ diktat. Money supply levels were negative in 2012 because of a recessive private and public demand. Without higher public income, the state will struggle to maintain pension and health coverage spending. The bailout is a patriotic must.
Indeed, Spain needs technical but also political assistance to redress the hesitant and often deficient action of the current government. Even if backed by an overall majority in Parliament, the government seems unable to offer a solvent alternative to a messed institutional framework and an economic policy that has failed.
In 1962, a World Bank report said about the Spanish economy: “the government cannot stimulate the private and public initiative unless it fixes its cumbersome and inefficient fiscal system, and simplifies its administration.” Today we need again independent help to fulfil that claim that has been proved right many times before: “Spain will surprise evebody.”