Spain will survive the crisis

Spain will not only survive the crisis but will come out of it “strengthened”, according to Luis de Guindos, the Spanish Economy Minister.

“Spain is a country that has made mistakes in the past and accumulated imbalances. It is now in the process of correcting all these problems”, de Guindos said, talking to German newspaper Frankfurter Allgemeine.

He went on to say that “We will put our budgets in order. Our government, elected four months ago, has an absolute majority in parliament and a clear mandate for savings and reforms. With this we will succeed.”

In response to questions regarding the 25 billion euros in budget cuts recently announced he said that financial consolidation is inevitable, “The previous government left us with a deficit of 8.5% instead of the 6% forecast”.

“We must therefore make further efforts even in the midst of a recession, and we must restore confidence, especially in the Spanish economy. That means not only reaching a deficit of 5.3% this year, but 3% in the coming year. We are committed to that goal”, the minister explained.

De Guindos once again stated that “what we are doing is absolutely necessary. Spain currently has a funding problem. If the markets do not see consolidation then state funding could get more expensive. And that could lead to difficulties in the private sector also. Therefore it is essential to control the deficit.”

Although there were mixed reactions to the Spanish budget amongst EU members de Guindos is convinced that “the markets will react positively when they have studied our budgets in detail”.

Furthermore De Guindos recognises that 2012 will be a difficult year for Spain but “it will also be the year in which we will lay the foundations for recovery. The government is aware of this and does not want to raise false expectations for this year’s forecast. It will be hard with less growth and, unfortunately, more unemployment. But we will be laying the foundations for a better 2013.”

While recounting the first 100 days of the PP government de Guindos pointed out that he had approved a law of stability which “applies to all: central government, autonomous regions and municipalities,” and had approved labour market reforms which would “change the system largely responsible for high unemployment.”

“Therein lies the weakness of our economy,” said de Guindos referring to the countries huge unemployment figures which are likely to increase slightly this year before dropping in 2013.

De Guindos announced further steps to improve the struggling country including “reform of public services, especially health and education.”

He also mentioned reforms within the banking sector that “will get rid of the weakest” and will mean “a much healthier financial sector with fewer, but stronger, banks.”