THE FINANCIAL TIMES on Spain's economy and the ability of Zapatero to do what needs to be done:
Spain, at four times the size of Greece in terms of its economy, is by far the largest of the budgetary laggards that will be facing renewed scrutiny, and probably higher financing costs, in the sovereign debt markets.You don't say.
The crucial issue for Spain and its European neighbours is the credibility of its “stability plan”, which outlines sharp cuts in government spending, including a near-freeze on hiring civil servants, and aims to reduce the deficit from 11.4 per cent of gross domestic product last year to 3 per cent of GDP in 2013.
Although it will have no short-term impact, Madrid has also proposed increasing the retirement age to 67 from 65 to secure the financial health of the pensions system.
José Luis Rodríguez Zapatero, prime minister, faces an uncomfortable spring, for very few economists, analysts or foreign investors are convinced either that the plans are plausible or that the government has the will or ability to implement them.
“It is all air,” said Luis Garicano, professor of economics and strategy at the London School of Economics, “just ideas that for the most part the government cannot put in place by itself, particularly on pensions or public employees.”
Nomura said it was “not convinced” that the austerity plan could be implemented. Standard & Poor’s, the rating agency, predicted that the budget deficit would stay above 5 per cent of GDP until 2013, well above the eurozone’s widely abused 3 per cent limit.
Critics of the austerity plan, which has been sent to Brussels for approval, point to three main obstacles. First, its economic forecasts are over-optimistic. Second, central government has direct control over only about a quarter of expenditure, with the rest disbursed by autonomous regional governments and the social security system. Third, the Socialists lack the necessary will.
When they talk to foreigners, Spanish ministers say they are determined to do whatever it takes to restore order to their public finances. But when they address their supporters at home, they emphasise plans to maintain social spending.
The result is confusion and disarray.