Other priorities

Taken one by one, the economic measures announced on Wednesday by the prime minister are reasonable, and even beneficial. But it is doubtful they will solve the serious lack of confidence that is hanging over Spanish debt (both public and private). It is a good thing to increase the number of companies that can take advantage of a cut in corporate tax, and to see that private management of airports rises; it might even make sense to privatize part of the state lottery (although economically, that will not contribute much to correcting the deficit). Improving assistance for the unemployed is sensible, so that they find it easier to find work, while getting rid of the monthly payment of 426 euros for the long-term unemployed will help the public finances, although it will hit those suffering most in the crisis hard. These are, however, measures that will resolve little, because the severity of the times demands other answers.

The urgent decisions are of a different nature. The rise in Spain's risk premium has to be dealt with immediately, to avoid the threat of intervention or a bail-out. A situation like that of Ireland or Greece must be avoided. And what was announced on Wednesday is not sufficient to do that. The measures that are needed have been around for a long time. It's fair to say that some, perhaps the most important ones, do not depend on the government.

As was obvious on Wednesday, the possibility that the European Central Bank might announce that it will buy the debt of the "affected" countries sparked euphoria in the markets, and saw Spain's risk premium fall to 250 basis points. But others are definitely in the government's hands. In order of importance, the process of getting the financial market into shape must be speeded up, the timescale and approach for reforming the pensions system must be announced (something more precise than the vague explanations of Labor Minister Valeriano Gómez are needed), and labor reforms must be agreed upon.

There is a recipe that will reduce the concerns of investors regarding the solvency of Spanish debt, which partly depends on the government: a political agreement with the opposition Popular Party to bring order to the mess that is regional financing. Bringing order means imposing austerity plans, so that deficit objectives are met, and cutting off the path to the unfortunate issuing of so-called "patriotic" debt, which was begun by Catalonia and is now being imitated by Valencia. That bolsters the theory that the regional accounts are empty.

Reducing the risk that the regional system goes bankrupt is a question of survival. The PP must be involved in these decisions, if only because many of the sources of debt generation stem from their time in government. The initiative to push for such an agreement must come from today's government. And if the PP does not feel the responsibility to reach such a pact, then the public should know. That way there will be no doubt as to who is denigrating Spain's solvency abroad.