“The history of Spain is always associated with public debt crises. You can always stumble over the same stone, but you should not fall in love with it”, says economist José Carlos Díez – always identified as a “progressive” economist – at the end of a talk with Lorenzo Bernaldo de Quirós, always identified as a liberal economist. At the end of the talk, Bernaldo de Quirós asked Díez what he would do to cut Spain’s public debt, which stands at 110% of GDP. His answer is not to be missed:
“With such a high level of debt I would not touch IRPF (income tax) despite the expansive effect it could have, but capital income would. Spain needs to open a calm, non-ideological debate and see what its competitors are doing abroad. Capital is becoming more and more movable and we have a country next door called Portugal, which has a left-wing government, which is a stable government, and has implemented this policy of eliminating taxes on capital and high incomes, and it is going like gangbusters. Since Antonio Costa arrived in 2015, investment in business capital goods in the national accounts has increased by 42%, 18% in the eurozone and 15% in Spain. Portugal is growing in investment three times as much as Spain, and they are left-wing. We would have to go there.
And on the expenditure side, in an environment of 2-3% inflation, containing expenditure would be enough. You made the mistake of pensions in 2023, which is going to cost us dearly because it is cumulative and for the future, so don’t make any more mistakes… From 2019 to here Spain has even increased public spending over GDP by five points, it’s nonsense. Spending was increased because of the pandemic and we all accepted it, but by 2020. By 2021 we could have had a few more months, but by 2022 there is no excuse. We have to look at spending item by spending item and whoever is wasteful has to be removed from the Government, without mercy… Spain’s history is always associated with public debt crises. You can always stumble over the same stone, but you should not fall in love with it.”
