Spanish PM says debate over Spain's solvency 'unjustified'

Spanish PM says debate over Spain's solvency 'unjustified'

15th March 2010, Comments 1 comment

Zapatero maintains the need for his government to withdraw public spending as Spain shows signs of crawling out of recession by the end of the year.

Any debate over Spain's financial solvency is "unjustified", said Prime Minister Jose Luis Rodriguez Zapatero, who stood by his government's forecast that the recession would end by the year end.

"There has been a debate over Spain's solvency, over the public accounts," Zapatero said during an interview with public television TVE Monday.

"This is an unjustified debate because we have a public debt (as a percentage of GDP) that is 20 percentage points below the European average," he insisted.

"We are close to an economic recovery, we are on the doorstep of seeing the economy grow once again, although at slow rate," he added.

"Now that we have on the horizon a slow recovery we must reduce the deficit because it is not good."

In February, his government unveiled a plan to slash EUR 50 billion from the budget over three years.

Spanish Primer Minister Jose Luis Rodriguez Zapatero

The move was part of a bid to bring Spain's public deficit down from an estimated 11.4 percent of GDP this year to within a 3.0-percent limit set for the 16 nations that use the euro.

"We cannot have during many years such a high deficit as the one which we have now," he argued.

"But we have to do it harmoniously, withdrawing public spending, as the economy begins to show positive signs.

The programme was introduced after market jitters over Greece's ability to finance its huge debts spread to other nations on the fringe of the eurozone such as Spain, Italy and Portugal.

All three countries' economies are burdened by big deficits.

Spain's economy has been stuck in recession since the end of 2008 after the country's property bubble burst.

The Spanish economy shrank by 3.6 percent in 2009 but the government has predicted it will return to growth during the second half of 2010 even though it will still shrink by 0.3 percent this year.

But many financial analysts are sceptical that Spain's plan to slash the public deficit will work: they argue it is based on overly optimistic growth forecasts.

Ratings agency Standard & Poor's, warned in February that the country's public deficit was likely to remain above 5.0 percent of GDP through to 2013.

While the government predicts annual GDP growth will average 1.5 percent during 2010-13, S&P said it saw growth of just 0.6 percent during this period.

In December the agency lowered its credit rating on Spain from "stable" to "negative".

AFP / Expatica

1 Comment To This Article

  • Republican posted:

    on 18th March 2010, 11:57:17 - Reply

    Running with the PIIGS..enough said!

    Oh Boy Another Mistake America..aka..OBAMA