Main focus of Friday, July 13, 2012

Spain tightens austerity course

Spanish miners demonstrate in Madrid at the end of a two-week protest march against cuts in subsidies for the mining sector. (© AP/dapd)

After the Euro Group's agreement to bail out Spanish banks, Prime Minister Mariano Rajoy has announced further drastic austerity measures and plans, among other things, to raise VAT. Several people were injured in Madrid during protests against the crisis policy. Commentators hope the drastic cuts will pay off in the end, but aren't sure that Spain will be able to steer clear of bankruptcy.

Suffering will be worthwhile in the end

The Spanish government's austerity measures may delay economic recovery initially, but in the end they will encourage more sustained growth, the left-liberal business paper Cinco Días hopes: "Of course for a society like the Spanish one, which is used to taking out credit to attend to its investment and consumption needs, it's normal to spend less once the credit disappears and disposable income goes down - whether it's as a result of lower salaries, job cuts or increased taxes. Now these three factors are competing with each other. … So demand won't increase in the coming quarters and recovery will be delayed for months. If before we saw light at the end of the tunnel, now we see that it was only a train coming in the opposite direction. But Rajoy's drastic cure will work in the end. It may have the effect of contracting the economy in the short and medium term, but it will pave the way for healthier growth in the future. It will realise its full potential as soon as all the economic players - from individual households to the state - recover their balance and adjust to the costs, the prices and the margins." (13/07/2012)

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More from the press review on the subject » Fiscal Policy, » Economic Policy, » Social affairs, » Spain
Who's saying what » Spain in the banking crisis

Austerity programme pushing Spain into the abyss

The draconian austerity programme announced by Prime Minister Mariano Rajoy will plunge Spain into the abyss, writes the liberal daily De Standaard: "Of course it's an illusion that the budget deficit can be reduced in this way. The opposite will be the case. … It almost looks like Madrid has set out to prove that this strict orthodoxy leads to ruin. Apparently the glass needs to be left completely empty before the next step finally puts an end to this madness. And there is another indication that the euro crisis has reached a state of madness: a group of strong euro countries can finance its debts more cheaply than ever. Their budgets are benefiting from the crisis. … But this is no doubt the ominous calm before the storm. If the engine doesn't want to start up at these interest rates then obviously lack of credit is not the problem, and cheap money not the solution. Rather the entire system is broken. Then confidence evaporates. And no one knows how to repair the car." (13/07/2012)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Tax Policy, » Spain, » Europe
All available articles from » Bart Sturtewagen
Who's saying what » Spain in the banking crisis

Hopefully Spain can hold out until Christmas

Whether Spain's reforms will make a positive impact won't be clear until the end of the year, the liberal business paper Handelsblatt concludes, but it's not sure the country won't go bankrupt before then: "There was good news for the Spanish this week: they have a year longer, until 2014, to reduce their new indebtedness from the most recent level of 8.9 percent (end 2011) to below the deficit limit of three percent. … However even this short-term concession won't ease the pressure from the financial markets. If, by some means, it becomes clear at the end of the year that Spain will manage to attain its new budget goal, and if, by some means, there is a sign that the structural reforms are starting to take effect and that the economy has reached the end of its nosedive, confidence could resurge and lead to lower financing costs. With the current interest rate level, however, Spain won't last for that much longer." (13/07/2012)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Spain, » Europe
All available articles from » Anne Grüttner
Who's saying what » Spain in the banking crisis

Higher airport taxes counterproductive

As part of its efforts to balance its shaky budget Spain raised its airport taxes on July 1. The left-liberal news portal Polityka Online sees this as counter-productive in a country whose economy is heavily dependent on tourism: "The Spanish government's decision is all the more surprising because as recently as June it was boasting that unemployment had gone down for the first time in a long period. Up to 100,000 Spaniards found employment at the beginning of the summer season. There was no talk of a revival in the industrial or construction sectors. So it looks like this improvement in the situation is down to the millions of tourists coming to the country. … Mariano Rajoy's government has plucked the hen that lays the golden eggs instead of looking after it. … This decision is great news for the Greeks and Portuguese. They can count on attracting the tourists who don't want to pay extra on the tickets they bought months ago." (13/07/2012)

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More from the press review on the subject » Tourism, » Economy, » Spain
All available articles from » Cezary Kowanda
Who's saying what » Spain in the banking crisis

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