Spain passes plan to prop up economy

15th August 2008, Comments 0 comments

The government has passed a package of 24 initiatives to offset the deepening economic crisis in Spain.

15 August 2008

MADRID - The government on Thursday passed a package of measures aimed at nursing Spain's increasingly sickly economy back to health, but opposition politicians and many analysts remained incredulous about the effectiveness of the proposed cure.

The approval of the 24 initiatives - some new, some announced before the summer - marks the latest effort by Prime Minister José Luis Rodríguez Zapatero's Socialist administration to counteract the deepening economic crisis of the past year.

Included in the measures are plans to liberalise the services sector, accelerate the approval of new public works projects, eliminate the Wealth Tax, spur the construction of subsidised housing and help struggling small- and medium-sized businesses.

With an estimated price tag of EUR 20 billion over the next two years, the latest economic stimulus package comes on the back of an EUR 18-billion spending plan passed in April that included EUR 400 tax rebates for workers and pensioners and increased spending on infrastructure projects in a bid to prop up the flagging construction sector.

"The government is doing everything in its power," Zapatero said after Thursday's Cabinet meeting, for which ministers were recalled from their summer vacations.

The prime minister acknowledged that Spain is facing a scenario of economic "stagnation" over the coming months, but argued that the measures should help the country return to solid rates of growth in 2010.

"We are not mortgaging our future... these are not measures that put bread on our tables today but leave us hungry tomorrow," Zapatero told reporters.

The Cabinet meeting on Wednesday followed a rare preparatory meeting intended to convince voters and increasingly critical opposition politicians that the government is serious about resolving the country's growing economic problems.

"The government wants to send a message of confidence to the people," the Economy Ministry admitted in a statement. "It believes that the country will resolve this crisis and emerge from it in a stronger position."

However, the administration's confidence in its plans and its overall optimism about Spain's economic prospects have been tempered by data that has gone from bad to worse.

On Thursday, the National Statistics Institute reported that Spain's economy grew by just 0.1 percent in the second quarter from the first three months of the year. A day earlier it said year-on-year inflation in July had soared to 5.3 percent - its fastest pace since the last recession in 1992 - and it had previously reported that unemployment had soared to 10.44 percent, its highest level in three years.

Given such dire statistics, opposition conservative lawmakers argue that the government has done too little too late.

"These are refried measures [...] they will be ineffective," declared Cristóbal Montoro, a former finance minister and the opposition Popular Party's spokesman on economic affairs.

The PP argues that Zapatero sought to hide the true extent of the crisis from voters ahead of the March general election, in which he secured a second term in office, and has since failed to come up with effective solutions. PP officials said that the meetings this week amounted to little more than a "photo opportunity" for Zapatero and his ministers.

"The impression the prime minister is giving is pathetic. He is showing he is incapable of resolving an economic crisis that the government doesn't even accept exists," Montoro said.

[El Pais / A Eatwell / Expatica]

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