El trato de la prensa económica exterior.


Spain’s economic stagnation

The zapping of Zapatero

After procrastination and paranoia, it is high time for some
prime-ministerial leadership

Feb 11th 2010 | From The Economist print


IF GREECE is broke, can Spain be far behind? More than four times as
big as Greece, Spain has received almost as much unwelcome attention
from investors. This month the Madrid stockmarket has tumbled and the
risk premium on Spain’s bonds has risen (see article).
Aides to José Luis Rodríguez Zapatero, the Socialist prime minister,
claim that Spain is the victim not just of a speculative attack but also
of a plot led by “the Anglo-Saxon press” to destroy the euro.

To this piffle the best retort is: grow up. It is true that Spain is
not Greece. Its public debt, relative to the size of the economy, is
lower than that of Britain or the United States. It has not had to bail
out its banks. And fears of financial contagion have made the markets
unnaturally volatile. But there are good reasons for investors to worry
about Spain. It has the highest unemployment rate in Europe, at 19.5%;
an economy still in recession, which will not grow appreciably until
next year; and a fiscal deficit that jumped to 11.4% of GDP last year,
as recession cut tax revenues and forced up spending on the unemployed.
Without a faster return to growth, the public debt will quickly become

To make matters worse, Mr Zapatero looks out of his depth. He was a
popular leader in the good times, during Spain’s long boom. But he
failed to see the bust coming. When he belatedly recognised that the
economy was in trouble, he misdiagnosed the problem as an imported
recession that he could safely wait out. He carried on doling out public
money and raising pensions and public-sector wages while shunning
reform. Over the past month the markets have grasped that this course,
if he persists in it, would lead to ruin. They are one step ahead of the
government, which has reacted with fumbling confusion, abruptly
launching an austerity plan and a vague scheme for labour-market reform,
only to withdraw bits of both at the first cheep of protest.

Many of Spain’s troubles start at home. The boom relied on a housing
bubble, and on the low interest rates that came with the euro. Growth
will now have to come from investment in other parts of the economy and
from exports. But relative to the rest of Europe, Spain has become a
high-cost, low-productivity economy. Wage indexation has made businesses
uncompetitive. Generous severance arrangements discourage firms from
hiring workers and have created a two-tier labour market and mass
unemployment. Years of buying off regional governments with cash and
exaggerated devolution means that the central government now directly
controls only a fifth of spending, while businesses must surmount sierras
of overlapping regulation.

A national pact
for reform and growth

Rekindling growth and mustering a commitment to start slashing the
deficit once the economy revives will take more than an executive
decision. To reform the labour market, the economy and public spending,
Spain should take a leaf from Germany’s book—or indeed from its own
transition to democracy in the late 1970s—with a national pact involving
the unions, business and all the main parties. An earlier Socialist
prime minister, Felipe González, was capable of such statesmanship. But
Mr Zapatero has offered only tactical fixes to placate the unions, the
regional barons—and now the bond market. He has only a few months to
show that he can take the radical decisions needed to prevent years of
stagnation, which could unleash the social disorder he fears. Delaying
the pain will only increase it. If he cannot find it in himself to start
leading, many in his own party as well as ordinary Spaniards may soon
wonder why he is in the Moncloa palace.

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