Spanish finance minister promises more reforms
Tuesday, April 19, 2011
MADRID (AP) — Spain’s Finance Minister Elena Salgado said Tuesday that the government will introduce more reforms in the coming couple of months to boost confidence in its struggling economy and that the 1.3 percent economic growth target for this year will be met.
“We have improved our image a lot in the markets in recent months owing to the major reforms we have carried out and this quarter will also be one of reforms,” she told Cadena SER radio.
She said the reforms would not be major but would include measures to reduce Spain’s black economy, a liberalization of retail opening hours and changes to civil servants pension system.
Prime Minister Jose Luis Rodriguez Zapatero was adamant last week that Spain did not plan any more belt-tightening measures.
Salgado dismissed sharply increased bond market pressure Monday as temporary and said it stemmed from market fears over Greece’s debt and speculation that Finland may block future eurozone bailouts. She said such sudden increases were of little importance and affected many countries. Spain was also forced to pay hiked interest rates in an auction Monday of 12- and 18-month bills, ending a run of decreases in recent auctions.
The reforms would help calm markets again, she said.
The yield on the country’s 10-year bonds shot up to 5.3 percent Monday, making for a spread — or difference — of around 2.30 percentage points with the benchmark German equivalent. That’s up from 1.7 percent last week.
Signs of easing emerged Tuesday with the spread down around 2.25 percent.
Salgado insisted Spain was on the right track and that this was recognized last weekend by the International Monetary Fund.
“We continue to believe we will have 1.3 percent growth in 2011,” she said.
Spain’s central bank, however, predicts the economy will grow by just 0.8 percent.
Salgado said Spain would also press ahead with the restructuring of its savings banks, which were heavily exposed to Spain’s collapsed real estate sector, which saddled them with billions of euros in foreclosed property.
That collapse together with the international financial crisis threw Spain into a recession that left it with a bloated deficit and a 20 percent-plus unemployment rate, the highest in the European Union.
Spain has carried out labor market reforms and imposed spending cuts as part of a plans to slash the deficit, stimulate the economy and ward off the possibility of contagion from the eurozone debt crisis.
Its deficit target for this year is 6.0 percent of GDP, down from about 9 percent in 2010.
The IMF says the 2011 figure is about right, but it forecast the deficit will be 5.6 percent of economic output in 2012, way above the 4.4 percent foreseen by the government.