Spain’s crisis will be over by 2013

Jaime García-Legaz
“light at the end of the tunnel” – Jaime García-Legaz

This year will be “the last of the crisis” in Spain and there is “light at the end of the tunnel”, according to Spanish Secretary of State for Trade, Jaime García-Legaz.

In an interview with Spanish radio network, COPE, García-Legaz also said that if government plans to raise VAT went ahead they would also lower social security contributions to restore the balance.

He was keen to point out that along with the government many of Spain’s biggest companies are also predicting growth in 2013 along with the International Monetary Fund who now forecast that Spain’s crisis will be over by next year.

This doesn’t mean an end to spending cuts or austerity measures though and García-Legaz stressed that cuts “will have to follow” and that Spain must “persevere” with them if it is to meet deficit targets and it’s commitments to Europe.

“If we do not comply, we will lose the confidence of international investors. It is therefore essential to continue with the adjustment of public spending,” he said.

If Spain is to see growth then spending cuts must be implemented, the minister added, saying that at this point Spain must understand that more spending does not bring economic growth. Growth, he said, “will not come from expenditure, but from structural reforms”.

In the event of  a VAT increase the minister said social security contributions would be rolled back as compensation and that this was a measure that the business sector had been discussing for some time.

“This is what is called fiscal devaluation. If we lower the contributions and they are offset by the VAT, the cost of goods will lower. It is a gain in competitiveness for our products and without a doubt that is something that we need”, he said.