New economy minister, from Lehman collapse to Spain crisis

21st December 2011, Comments 0 comments

Spain's new economy minister, 51-year-old Luis de Guindos, comes to the job as a survivor of one of the world's biggest financial failures -- the collapse of US investment giant Lehman Brothers.

Named to the pivotal cabinet post by Prime Minister Mariano Rajoy on Wednesday, the balding financier faces a daunting task rescuing an economy teetering towards recession with a 21.5-percent jobless rate.

He has some solid political credentials with the ruling Popular Party, which won an election landslide on November 20 as voters punished the Socialists for their handling of the economic slump.

De Guindos was a member of then prime minister Jose Maria Aznar's team from 1996-2004, working in the economy ministry and rising to become state secretary for the economy from 2002-2004,

But the reputed economist, a married father of two who was born in Madrid on January 16, 1960, has also carved out a career in the private sector.

After rising to the post of chief executive of financial consultancy AB Asesores, he became executive chairman for Spain and Portugal at Lehman Brothers from 2006-2008.

Lehman collapsed on September 15, 2008, after its risky bets on the US housing market turned bad, sending shockwaves through the world's banking system and sparking a global credit crunch.

Only this month, a US judge approved plans to end Lehman Brothers' US bankruptcy and move it toward liquidation, settling creditors' claims worth around $450 billion.

Nomura Securities bought some of Lehman's Spanish assets in 2008 and De Guindos worked for the Japanese firm for several months of that year.

He is now director of the Financial Sector Centre, created by PriceWaterhouseCoopers, and of the IE Business School in Madrid. He is also on the board of energy group Endesa.

De Guindos favours the creation of a "bad bank," a state-run structure that would pool the bad property assets weighing down banks since the 2008 housing bubble collapse.

He has called for deep reforms of the banking sector, of the labour market with notably a relaxation of collective bargaining rules, and of the property market with measures to stimulate rentals.

"Rajoy has sent a clear and transparent message: austerity and reforms to defend ourselves within the euro," he declared at an economic seminar in Madrid last month.

Spain has promised to trim its national deficit, a big worry for financial markets, from 9.3 percent of gross domestic product last year to 6.0 percent this year, 4.4 percent in 2012 and 3.0 percent in 2013.

But De Guindos told the seminar that Spain would find it tough to meet the target for 2011 and he warned of public and private debt repayments due in 2012 amounting to 330 billion euros, or 30 percent of GDP.

He pressed his demands for reform to labour markets and banks.

"It cannot be that when activity declines businesses automatically fire temporary workers. It cannot be that when a company's revenue declines 50 percent its industrial sector agreement obliges it to raise salaries by inflation plus two points," De Guindos argued at the seminar.

"Half of the financial sector needs a new round of restructuring," he added.

© 2011 AFP

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