Obscure report on Spain

The International Monetary Fund (IMF) report on Spain for 2011 confirms its earlier diagnosis of the Spanish economy. Dated July 7, the document gives the impression of having been written months before. If this now renovated institution wants its reports to be useful, it ought to make a greater effort to enter into the economic and financial reality of the countries it is dealing with, and to produce its analyses with greater speed. At the same time it should stress the specific difficulties involved in reaching easily identifiable decisions.

The report approvingly notes that in the last 12 months the government has made decisions aimed at strengthening the confidence of the financial markets. It does not, however, comment on the fact that, just as has been the case in other economies, this confidence not only has not arrived, but, in view of the risk premiums Spain is now enduring, the markets seem to be demanding of it something more than a mere slimming-down of public spending.

Growth in Spain, necessary for a definitive shape-up of the economy, remains anemic. The report's only bright area is exports, but these are insufficient to compensate the fall in domestic demand, and to elude the contagion of the prevailing instability in the euro-zone sovereign debt markets. Nor is the IMF particularly original in its identification of the challenges faced by the Spanish economy. Weak productivity and a dysfunctional labor market are the most outstanding of these. And though it partakes of the political agenda of reforms defined by the government, the IMF's experts call for greater firmness in obtaining fiscal sustainability, in restructuring the Spanish financial system, and in reforming the labor market. To achieve all this, it recommends that the Spanish government put together a broad array of political and social backing. As easily said as done, the report seems to suggest.

It is on this point that emphasis might well have been laid. The extremely serious situation that the Spanish economy has been suffering for more than a year has not brought forth a sufficient response in terms of understanding among the politicians, more concerned with electoral prospects than with making a cooperative effort to prevent the rise of unemployment and the fall of general living standards. The reform of the financial system, and the construction of a clear framework for a rational reshaping of public administrations, are areas where a basic political agreement seems to be called for.

But the IMF's assessment does not extend to the quality of public institutions, or the capacity of political organizations to strengthen confidence - aspects that, in ever greater measure, current experience reveals as being essential in coping with challenges as complex as those brought about by the crisis. Nor has the IMF been able to suggest specific moves in this tortuous transition, which will last until the formation of a new government resulting from the upcoming general elections.