Europe welcomed the toughest budget in the history of Spain, turned into the biggest financial concern of the continent, said Friday in Copenhagen, the Spanish Minister of Economy after meeting with their counterparts in the eurozone.
“The reaction has been generally positive,” although the European Commission and EU partners are waiting for “specific details” of the State Budget for 2012, said Luis de Guindos in an appearance before the press.
“There is a perception that Spain makes a remarkable effort,” he added, saying that the Spanish government is willing to apply that budgets “as soon as possible as fast.” The Spanish government Friday approved its draft budget for 2012, which provides a setting of “more than 27,000 million euros”, especially by freezing the wages of civil servants and low budgets of the ministries of 16.9 % on average.
After learning this information, Olli Rehn, European Commissioner for Economic Affairs, praised the “determination” of Spain, but said in a press conference that will be necessary to “evaluate” in more detail the budget.
Jorg Asmussen, board member of the European Central Bank (ECB) said on the other hand the hope that this budget be implemented as quickly as possible, to have a quick “impact.”
The Spanish Government’s objective is clear: in twelve months to reduce the deficit of 8.51% in 2011 to 5.3% of GDP this year. For 2013, the goal is to lose 3% as stipulated in the Stability and Growth Pact in Europe.
In Guindos said the “adjustment” in Spanish has made a “realistic macroeconomic scenario.” This will, in his view, “positive benefits” such as “credibility” in the Spanish economy. The Spanish minister said further that “has been rated (in Europe) the set of measures” taken by the conservative government of Mariano Rajoy – in office since December – referring, among others, the recent labor reform .
However, the severity of the Spanish situation was not lost in the Copenhagen meeting. “Spain is in a very difficult situation,” said Olli Rehn, before the start of the talks.
The U.S. bank Citi was more virulent on Wednesday, saying that “Spain should probably, in our opinion, enter into some kind of program troika (EU aid, the ECB and the IMF, editor’s note) for 2012.” A European source denied, however, that possibility was necessary.
But most analysts agreed on the need for Spain to align its accounts at 50,000 million euros, taking into account the recession this year should bring down the GDP by 1.7%. Other experts fear that the cure of austerity adopted to accentuate the recession, in a country that already has a record unemployment rate (22.85%).
Finally, regarding the bailout fund expansion of the eurozone decided at the meeting in Copenhagen, De Guindos said: “This sends a signal of commitment” from Europe to tackle the debt crisis. But what “really calms markets are domestic policies” adequate, qualified the Spanish minister.
The ministers of the 17 euro zone countries agreed in Copenhagen to give the European Stability Mechanism (MEDE), firewall anti-crisis which will come into force in July, “a maximum output of 800,000 million euros” (one billion dollars), could be used to go to help countries in difficulty, as might be the case in Spain.
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