Can Spain become EU’s periphery locomotive?

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In his first interview before election date at Spanish Cadena SER radio, Mariano Rajoy assured that the whole of Spain’s economy “is performing better”. He had just received good April’s unemployment figures having reduced by 111,565 people, which means the most significant decrease in April since 2005. Furthermore, social security affiliations increased by 133,770, the bulkiest number since that same year massive regularization. Getting into detail, these unemployment figures remain still deeply negative -the European Comission’s prospects even suggest a rate of 24% by 2014- but they involve the trend downwards in job destruction may have been broken.

As Rajoy underlined as well that year 2017 could be the starting point for public debt to begin decreasing and for citizens to see all the adjustment efforts “make sense”,  he also reminded the fall of risk premium and 10-year bonds yields became crucial for the Spanish companies’ financing abroad. This is another Spanish economy’s tendency that seemingly broke. The country’s risk premium opened at 152 basis points on Tuesday, 100 over Italian.

Nevertheless, the corporate and private financing breach between North and South of Europe did not close in these long years of crisis.

“It is truth that Germany or France get cheaper financing for their companies and therefore I greet that Jean-Claude Juncker wants to close that gap,” Mr Rajoy said. “It’s the ECB who must ultimately make that decision. We wished the central bank had opted for a program similar to the Bank of England or the Bank of Japan.”

Not ignoring that the European Commision estimates are just forecasts, not confirmed data, they do support the Spain’s government positive feeling about the country’s economy: Spain could turn into the driver of peripheral EU with a growth over Italy, Portugal and even core France’s economy.

The spring estimates the EC published on Monday reflected the Euro zone is to increasingly recover by 1.2% in 2014 and 1.7% in 2015. The major push for the regional economy would be the internal demand combined with investments growing by 2.3% and 4.2%  in next two years. In this context, Germany will remain the EZ’s locomotive with a GDP’s increase of 1.8%  an 2%,  but peripheral countries will gain force with Spain leading growth by 1.1% in year 2014 and 2.1% in year 2015 thanks to budget adjustments and current account deficit increase. Meanwhile, Italy is expected to grow by 0.6% and 1.2% , respectively, and Portugal by 1.2% and 1.5%.

Spain’s GDP is estimated to beat even France’s, whose government just approved historical cuts by € 55 bn, with a growth of 1%  and 1.5%.

About the Author

Julia Pastor
Julia Pastor has broad experience in business writing for Consejeros Media Group at Consejeros, Consenso del Mercado and The Corner. Previously, she worked for the financial news agency GBA and contributed to El País Business. She holds a Master's in Financial Journalism and a degree in English from the Complutense University in Madrid.

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