‘Inaccurate’ to liken Spain with euro debt disasters: OECD
It is "inaccurate" and "unfair" to liken Spain with eurozone debt disasters Greece and Ireland, the head of the OECD said Thursday, as Portugal became the third state to request an EU financial bailout.
“Spain will not have the same problems Portugal is facing,” Angel Gurria said in Budapest, where European Union finance ministers are gathering for weekend talks now likely to be dominated by Lisbon’s request for aid.
Madrid had been addressing its problems for some time and they were “never the same” as those in Lisbon, Gurria said.
Spain had run a public budget surplus for five consecutive years before the financial crisis broke in late 2008, he pointed out.
It was therefore “completely inaccurate, totally unfair” to compare Spain and other EU states with high debt levels to the only two, Ireland and Greece, where he said bailouts had been “inevitable.”
“Spain, Italy, the United Kingdom never should have been talked about” in terms of needing a bailout, Gurria said.
Talk of debt rescues “should have stopped with Ireland” in December last year, he added.
The secretary-general of the Organization for Economic Co-operation and Development said the Greek bailout had been a problem of statistical “rounding” in which a 4.0-percent deficit had become a 14-percent shortfall.
In Ireland’s case, it had come down to a “massive failure” by regulators who let a bank get so big it could “bring down a country,” and the Dublin government’s decision to guarantee bank debts.
In that moment, the Irish state “bought all the problems for itself,” he said.
Spain could escape however, if people recognised that what European political leaders were now doing was “cleaning the closets, counting the skeletons,” Gurria said.
Outgoing Prime Minister Jose Socrates broke the news late Wednesday, and Lisbon will put a formal request for loans that could be worth up to 70 billion euros ($100 billion) later today.
Spain has been quick to distance itself from its Iberian neighbour, but Gurria insisted there “should not be a stigma” attached to any such demand.
“There is life after debt,” he quipped.
Gurria is in Hungary to plead for “structural reforms” to labour, pension and other markets as the way to boost growth.
Reflecting on a year in which the eurozone’s problems have rarely left the spotlight, he blamed dysfunctional, “ill-informed” bond markets and credit “rating agencies making things worse all the time.”
A series of downgrades of Portugal’s credit-worthiness made Lisbon’s latest foray onto money markets on Wednesday so costly its government decided it was better to turn to its euro currency partners, like Dublin and Athens before it.