Weekend long read: Spain’s finance and economy ministers open their portfolios to Wall Street and Frankfurt

By Ana Fuentes in New York, and Julia Pastor in Madrid | Right before the three crucial meetings (Eurogroup, Ecofin and European Council) that will take place in the next 10 days, the Spanish government is deploying its best arguments in order to regain markets’ trust. Rajoy’s economic team, the Finance minister Luis de Guindos (left) as well as Cristóbal Montoro, minister of the Treasury, appear in the weekend edition of two of the most influential financial dailys of the world, Wall Street Journal and Financial Times Deutschland.

In a commentary for the Wall Street Journal, Spain’s finance minister, Luis de Guindos has presented the government’s plan for reviving Spain.

Mr De Guindos, who qualifies the current situation of outrageous, insists that the Spanish authorities know which measures need to be urgently adopted to generate stable employment and sustainable growth.

The Spanish parliament was among the first in Europe to introduce a constitutional change to limit budget deficits (…) A law enforcing this principle will be enacted before March 31. This law will set expenditure ceilings for all public entities, including the Estate Administration, the Autonomous Regions and major city halls. The entire public sector will not be allowed to run structural deficits of more than 0.4% of GDP or accrue debt of more than 60% of GDP. Spain will therefore be among the first EU members to introduce in its domestic legal framework the economic governance agreements just reached at the EU.”, he writes.

Mr De Guindos points out some of the reforms needed: first, the implementation of a new framework suitable for small and medium enterprises (80% of total employment in Spain). Second, to simplify working contracts from 40 to two types and to put labor-market policies in place that foster productivity and innovation.

His article gave rise to a debate among foreign and Spanish netizens:

“Rarely is the solution within the hands of government. Mostly, the people must solve the problems: the government just has to get out of the way and let them. Spain is a wonderful country with a very positive and professional people. I hope there are enough smart people in your country to come up with all the new business ideas and technologies it will take to re-employ all those people,” writes Kevin Alexanderman.

“Your measures will help free up labor market inefficiencies and prevent the competitiveness gap that has emerged from getting worse – but they don’t do much to improve it. What is needed to combat this is more substantial cuts in the role of government and public spending levels at the same time as tax cuts for the private sector, especially tax cuts for the capital investment that will be needed to boost your labor productivity,” says another reader who signs Mark Boucher.

The Spanish government certainly had a plan to have its voice heard in the main financial media, as Mr Montoro gave an exclusive interview to the Financial Times Deutschland to say that Spain may miss its deficit goal of 4.4 percent).

The German newspaper headline was ‘The new conservative Spanish government doubts it can achieve the 4.4% deficit target fixed by the EU for 2012’. Then, in his statements, Montoro says that

“it would be desirable and good for Spain reaching the deficit target […] Firstly, we must wait for the next EU growth forecast since the target is based on the 2.3% outdated growth prospect of the former Socialist government […] This will be a difficult year, anyway, an excepcional one.” Finally, from the European partners, the ministry does not expect “any help” but some “sensibility” towards Spains’ difficult times.

Both the FTD and WSJ have published information about Spain and other Eurozone countries that many experts regard as not accurate or biased. The WSJ said once that many Eurozone countries were preparing to return to their old currencies. In a video report published in their website in April 2010, a financial guru depicted Spain as ‘the Lehman Brothers of Europe,‘ a country which

“exemplifies the European dream” because of its “prosperous life buoyed by a generous welfare state,” a country used to “fiesta and dance.”

Meanwhile, the Spanish media analysed both politicians’ comments from very different angles, some absolutely conflictingEl Mundo believes that

“the two-headed economic machine of the government has given a malformed criature due to the contrast between Montoro’s statements in Financial Times Deutschland and Luis de Guindos’ words in The Wall Street Journal. Investors that both are seeking to attract may not understand anything.”

In opinion of the digital Capital Madrid,

“both ministries’ messages are complementary and coincide on the fact that correcting the deficit is not only a question of austerity, but also there must be some hope of light at the end of the adjustment tunnel.”

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