When will the crisis in Spain come to an end?

Their words come in a moment when growth expectations for the EMU in 2013 have been lowered: the ECB thinks the economy will grow between -0,9% and -0,1% (it was -0,9% and +0,3%). And they also feel entitled to give advice to the Spanish government. Hans-Werner Sinn has suggested PM Rajoy to follow the German model. Weidmann precised that Spain “still had to suffer”. However, and despite unemployment figures hitting new records, Spanish minister of Labor, Fátima Báñez insists that the country is leaving the crisis behind.

Up to now, most of the economic forecasts believe that we’ll see a mild recovery in 4Q 2013. Morgan Stanley even predicted that Spain could become “the next Germany” of the eurozone, although they didn’t say when. There are too many forecasts but none of them can give a clear calendar. Many economists are cautious but some have been surprisingly bold in their predictions- they can of course have a political agenda.

Applied Economics Professor at Autónoma University of Barcelona Josep Oliver has written that the Spanish economy will leave red numbers behind in 2014 if the euro stability is not questioned, although employment could take up to 17 years to pick up. He has said that his most optimistic predictions are that employment could reach 2007 levels by 2022.

Economic Structure Professor at Ramón Llull University Niño Becerra doesn’t show more optimism than his peer. “We won’t see the end of the crisis before 2020. After the adjustment plans and bailouts there will be a huge drop in the economy, not only in Spain, but a global one,” he forecasts.

FT analyst Münchau, believes that 20 more years of crisis is quite too much. “What Europe needs, Germany doesn’t accept it and what Germany wants is not enough to solve the crisis,” he says.

The European Comission and the ECB believe the recession will be over next year but it’s crucial that the consumption will reboost, and the credit will flow into the private sector and the structural reforms start to work out. The main analysts as well as the Spanish government members agree that the main reforms have already been put in place. After an extremely hard labour reform, the Spanish economy is recovering its levels of productivity, exports have rocketed and tourism is showing highly competitive, the country is solving its financial problems and the regions are making fiscal adjustments as well as managing their budgets more carefully. Housing prices are believed to stabilize soon. And with banking recapitalization already in place, the financial system will be ready in 18 months to help sort things out.

About the Author

Carlos Díaz Guell
Editor at consensodelmercado.com and innovaspain.com, Carlos began his career in financial journalism as founding member of El País. He's been communications director of Bank of Spain, member of the ECC at the European Central Bank, Institutional Relations director at Iberia and editor at La Economía 16 magazine.

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