Solbes insists inflation under control despite record rate

13th February 2008, Comments 0 comments

Economy minister seeks to calm Brussels over price fears

13 February 2008

BRUSSELS - Economy Minister Pedro Solbes on Tuesday told a gathering of European Union finance ministers in Brussels that the Spanish government was doing everything to keep inflation in check.

Spain's consumer price index (CPI) in December 2007 rose to 4.3 percent and in January it had accelerated a tad to 4.4 percent, compared with 3.2 percent in the European currency bloc.

Slovenian Economy Minister Andrej Bajuk admitted that inflation last year was "a very serious problem" in the bloc but said it should retreat slightly in the coming months.

Solbes, meanwhile, said that if global oil and food prices do not continue to rise in 2008, inflation from March in Spain could dip below 3 percent and to 2 percent in the Eurozone.

In December, when inflation in Spain had risen to its highest level in a decade, the government had said that prices would start to retreat at the end of the first quarter as the base effect of higher oil prices fades.

Of the European Union countries, the highest inflation was reported last year by Latvia (14 percent) and the lowest by the Netherlands (1.7 percent).

"Ambitious policies"
Solbes said that inflation in Spain would be contained by healthy fiscal policies recommended by the European Union or by what he called "ambitious policies" that would improve productivity.

With respect to the Spanish government's economic policy, Solbes rejected exceptional measures put forth by the European Union to tackle inflation, insisting that such moves would be counterproductive in the medium and long term.

In line with his European colleagues, Solbes also demanded that any future salary hikes would have to be linked to higher productivity.

At the end of last year the Bank of Spain expressed concern over inflation, noting in a monthly economic bulletin that the recent spike in prices could "generate permanent effects on cost and price formation processes via the indexing mechanisms in place."

On Monday Solbes had announced more bad news for the economy by revising downwards Spain's GDP to "slightly under" 3 percent versus 3 percent previously.

In December, Solbes had revised his forecast down from 3.8 percent.

[Copyright EL PAÍS 2008]

Subject: Spanish news

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