IMF Managing Director Christine Lagarde warned last week that Spain shouldn’t pour its energies exclusively into cutting expenditure but should also focus on economic restructuring. This must have been galling for Prime Minister Mariano Rajoy, who has, even his harshest critics would grudgingly acknowledge, maintained a commitment not only to reducing the deficit but to introducing accompanying reforms designed to generate growth and boost employment. The figures show that the deficit isn’t going down and employment isn’t going up, so while Mr Rajoy’s commitment may not be in question, his delivery certainly is. He, of course, argues that these things take time – something with … [Read more...] about Tales for Tapas: Reform and recovery
deficit
Rodrigo Rato: exiting through the revolving door
Given Rodrigo Rato’s previous form and his current predicament, the news that Telefónica has appointed him to the advisory boards of its European and Latin American businesses raises new concerns about transparency and corporate governance in Spain. Rato - who has also served as head of the International Monetary Fund and as Spain's economy minister - will help "reinforce the global vision of Telefónica", the country's largest telecommunications company said after announcing the appointment on January 4. Readers will remember that it was Rato who oversaw the privatisation of Telefónica back in 1997. Rato’s hiring by Telefónica comes less than a month after he was summoned before a … [Read more...] about Rodrigo Rato: exiting through the revolving door
A victory for Hollande, a victory for Spain
François Hollande’s French presidential election win has been trumpeted as a triumph for Socialists across Europe. Not only does it stem the tide of centre-right governments that have taken control of most EU countries, it also vindicates the European left’s resistance to austerity at any cost. And the champagne was being uncorked on Sunday at the headquarters of the Spanish Socialist Party (PSOE), as its leaders enjoyed the thought that finally, their neighbour to the north has a left-leaning president. We don’t know whether Hollande will deliver on some of his bigger promises, such as reducing the retirement age or renegotiating fiscal targets with the EU. But the fact that one of the … [Read more...] about A victory for Hollande, a victory for Spain
Energy debt burden looms large in Spain’s deficit reduction push
To say that the Rajoy government inherited a rough legacy is rather an understatement. The economy appears to be in even worse shape than the incoming Partido Popular government first thought and even as they chop away at public spending, confidence at home and abroad continues to slip. Less than three months in and Rajoy and his party were forced to restructure deficit reduction goals, much to the chagrin of austerity-minded allies in Brussels and Berlin. Unfortunately, the government’s campaign to rein in spending and reduce the deficit does not yet address one particularly large elephant in the room – namely, Spain’s beleaguered energy sector. Sure, we’ve seen the Rajoy government … [Read more...] about Energy debt burden looms large in Spain’s deficit reduction push
Tax hikes to hit residents
From the most recent Agencia Tributaria bulletins we have been told that 85% of that €6.2 billion tax bill is to come from resident income tax. This affects the employed, self-employed, people with savings and retired people receiving income from outside of Spain such as pensions. It will be administered as a complimentary income tax in addition to the current 24% + income tax that residents already pay. As you might have guessed this tax is on a sliding scale according to how much your income is: Tax range Complimentary income tax €0 – €17.707 0.75% €17.707 – €33.007 2% €33.007 – €53.407 3% €53.407 – €120,000 4% The increases … [Read more...] about Tax hikes to hit residents
Read my lips: Why did Rajoy break one of his few campaign promises?
“My intention is not to raise taxes.” It’s a line that Mariano Rajoy’s critics will repeat back at him for years to come. Much like George H. W. Bush’s infamous “Read my lips: no new taxes”, Rajoy’s pledge, made on December 19, during the debate ahead of his investiture as Spain’s new prime minister, has proved to be empty. Unlike Bush, Rajoy has not resisted or dragged his feet in performing a spectacular U-turn on this issue. Eleven days after saying he wouldn’t raise taxes, his deputy prime minister, Soraya Sáenz de Santamaría, announced tax increases that will bring in an extra €6 billion this year. As Spaniards digest the implications of the new Popular Party government’s … [Read more...] about Read my lips: Why did Rajoy break one of his few campaign promises?
The solution to the Catalan problem?
Catalan separatism has two anchor points, the traditional one is of a cultural nature (with the Catalan language at its core), the other one, of more recent creation and which has built up a new group of pragmatic followers making inroads even among Spanish speakers, is based on money: the fiscal deficit of Catalonia with the central state has over the past year or so evolved into the main argument for secession. This makes one feel that to get rid of the problem of Catalan separatism, Madrid only has to throw money at the region. And that it had better do, because this new group has the potential to grow into a serious problem, unlike the ethnocentrists, whose numbers remain basically … [Read more...] about The solution to the Catalan problem?
Ahead of election, Spain’s next prime minister leaves everyone guessing
Mariano Rajoy, leader of the opposition Popular Party, is set to put two election defeats behind him on November 20 and become Spain’s next prime minister. But his all-but-guaranteed victory (opinion polls suggest the PP will win around 190 seats in the 350-seat parliament, its largest ever majority) has little to do with him. Instead, it has much more to do with a three-year economic crisis, an intractable unemployment disaster and escalating worries about Spain’s debt and public account deficits – problems, compounded, if not induced in the eyes of many, by the economic mismanagement of the current Socialist administration of Prime Minister José Luis Rodríguez Zapatero. Those issues, … [Read more...] about Ahead of election, Spain’s next prime minister leaves everyone guessing
Fear and resignation in Spain’s deficit cap
A swiftly agreed, bi-party accord to safeguard the Spanish economy’s future. It should be music to every Spaniard’s ears. The governing Socialists and opposition Popular Party have finally reached consensus on a major issue, putting aside their ideological differences and petty electoral interests to introduce a constitutional reform that puts a cap on the public deficit. Such statesmanship harks back to the spirit of the Transition. Or does it? Having heeded the plea by the French and German leaders for deficit controls to be enshrined in eurozone magna cartas, José Luis Rodríguez Zapatero and Mariano Rajoy have responded. This extraordinary measure, they argue, will calm the jittery … [Read more...] about Fear and resignation in Spain’s deficit cap
Political turmoil threatens to rock Spain’s recovery
Only a few weeks ago, the big argument raging about Spain was whether or not it was “the next Greece”. The size of its deficit, difficulties in getting the economy growing again and its harsh treatment at the hands of international markets all made it look like the prize candidate for the EU’s next massive bailout. Many observers suspected a visit by IMF head Dominique Strauss-Khan to Madrid in June was the prelude to just such a move as José Luis Rodríguez Zapatero’s handling of the economy came under immense scrutiny. Now, however, the situation is slightly different. The bailout has not transpired and while the country has certainly not emerged blinking in the sunlight of market … [Read more...] about Political turmoil threatens to rock Spain’s recovery