Brussels eases Spain’s deficit target as economy continues to decline

Brussels has eased the target for Spain’s current account deficit to from 4.5 percent to 6.5 percent of GDP for this year, down from 7 percent in 2012. That means the new target date for reducing the deficit to the European ceiling of 3 percent is now 2016.

Good news for Spain?

Not at all. The economy is in a terrible state with no hope of achieving the initial targets, hence the reason for moving the goalposts.

In addition, there are conditions attached, including government reforms that include a national employment plan (which is way overdue with unemployment running at close to 27 percent and expected to get worse still), an independent body to oversee budget stability, and mechanisms to ensure the state pension scheme is sustainable given the demographic shifts in the population.

They also expect a decoupling of spending from inflation and an overhaul of the tax system by next March.

Can Rajoy do it?

He hardly seems capable, but then again there doesn’t seem anyone with the leadership required to steer Spain (or Europe) out of this crisis.

What Spain needs to do in order to speed up recovery (or at least slow down and stabilise the decline) is to devalue the currency. The only way of doing that is leaving the Euro; how much worse can it get before that is seriously considered?

Source: El Pais

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