Spain's new government vows to fix economy

22nd December 2011, Comments 0 comments

Spain's new conservative government vowed to rescue the country from an economic crisis and strengthen its standing in Europe, as it took office on Thursday.

The 13 ministers swore loyalty to King Juan Carlos and then dispersed immediately to their new posts to get Prime Minister Mariano Rajoy's austerity programme under way in the eurozone's fourth largest economy.

Among them, a former executive of the ruined US bank Lehman Brothers, Luis de Guindos, took up the key job of economy minister, tasked with helping get five million unemployed back to work and reassuring Spain's investors.

"I am convinced that with an effort by everyone and with the correct policies, Spain will be back on the path of sustainability," De Guindos said on formally taking office in a televised speech.

"We will get back to the levels of prosperity that we should never have left."

Analysts noted that De Guindos and several other ministers have backgrounds in economic and European affairs, important for their mission to convince markets that Spain is not a weak link in the eurozone.

"The government team Mariano Rajoy has chosen is consistent with Spain's urgent needs... employment and the need to generate international confidence," said Antonio Nunez of IESE business school in Madrid.

De Guindos, 51, was Lehman Brothers' executive chairman for Spain and Portugal from 2006 until its collapse in 2008, which heralded the start of the worst of the global financial crisis.

He "might lack in credibility because of his position as former president of Lehman Brothers Spain," but the former junior economy minister has "ample experience in the government", IESE said in an analysis.

Leading centre-left daily El Pais saw De Guindos as a technocrat in "a government of friends and loyalists" of Rajoy.

Economics professor Cristobal Montoro took charge of the Treasury, notably tasked with helping to tighten spending by Spain's regional authorities to cut the overall deficit, a major concern for financial markets.

The government holds its first weekly meeting on Friday.

With unemployment at 21.5 percent and warnings of a fresh recession looming, Rajoy has vowed to deepen the spending cuts that have already hit hospitals and schools and have brought thousands on to the streets in protest.

The new leader also wants Spain to take a strong role alongside other countries in efforts to stabilise the eurozone, shaken in recent months by market fears over the debts of members such as Italy and Greece.

His new Foreign Minister Jose Manuel Garcia Margallo, 67, a member of the European Parliament, tied Spain's role in Europe directly to its economic fate.

"My first concern is the European Union. A new intergovernmental treaty is being negotiated that will lay the first stone of the new Europe," Margallo said in a speech on formally taking office.

"We must immediately stabilise the markets and end the pressure on public debt," he added. "We have to find common tools to grow and avoid recession."

One of four women in the cabinet and its youngest member, 40-year-old Soraya Saenz de Santamaria, accumulated three posts: deputy prime minister, government spokeswoman and minister for relations with parliament.

The right-leaning newspaper El Mundo said she had assumed "unprecedented power".

Rajoy has said he will slash Spain's deficit by 16.5 billion ($21.7 billion) in 2012, through sweeping cuts, with only pensions escaping the knife.

Conservative daily ABC warned the task ahead would be arduous.

"It is a government prepared for an unprecedented crisis and which, with a smaller budget than any other, must apply the most thankless policies ever," the paper said.

The Madrid stock exchange rose on Thursday to a level around 1.0 percent higher in late afternoon trade, making back its losses of the day before.

© 2011 AFP

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