Socialists promise to put shoulders to economic wheel
Labour Minister speaks of reactivation plan as activity slows11 March 2008
MADRID - Just a day after winning re-election, the ruling Socialist government announced on Monday that it plans to introduce measures to reactivate the economy, which is beginning to show signs of flagging after uninterrupted growth of over a decade.
Labour Minister Jesús Caldera said the Socialists would fulfil their electoral promise of an across-the-board tax rebate of EUR 400 per taxpayer. "In addition to these measures there are others to reactivate economic activity, which the future government will surely take on board," he said.
Caldera suggested the government could avail itself of surpluses it has built up when the economy was growing strongly to fund public works to compensate the slowdown in the housing market after a decade-long boom. Spain booked a budget surplus of EUR 23.368 billion last year, equivalent to 2.23 percent of its GDP.
The government has so far stuck to its official forecast of GDP growth for this year of 3.1 percent. However, a downbeat report on the local economy released yesterday by Commerzbank spoke of the possibility of a technical recession - two consecutive quarters of negative growth.
Commerzbank said the prospects for other sectors apart from the property market are starting to look "increasingly negative." The research department of the German bank predicted GDP growth this year of no more than 1.5 percent and 1 percent in 2009. The IMF and the European Commission are forecasting growth of 2.7 percent for 2008.
Commerzbank said the government would sooner or later have to introduce labour market reforms in an effort to counteract Spain's lack of price competitiveness due to high inflation.
[Copyright EL PAÍS / ADRIAN SOTO 2008]