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In the midst of the crisis

We do not need frivolities such as that of Minister Báñez to climb out of the crisis

There is some room for doubt as to whether recent remarks made by the labor minister, Fátima Báñez, should be termed irresponsible or merely naïve. To announce that Spain is “emerging from the crisis” and that there are “hopeful signs,” just as unemployment is hitting a record of 5.7 million people, is mere chatter. Above all when everybody — including the government she belongs to — is predicting that these figures will get worse, much worse, in the months to come.

The minister, who has been depicting golden horizons ever since abusing her ministerial access to confidential information to leak to her own party the dimensions of a layoff plan being prepared by the Socialist Party for its workers, is now far less precise when it comes to explaining the source of the supposed light at the end of the tunnel.

She speaks of the rise in self-employment as a sign of improvement, ignoring the fact that in circumstances of recession the main factor in self-employment is not a sudden discovery of entrepreneurial zeal but mere desperation at not being able to find a job, with the option of retreating into the under-the-counter economy ever present.

Though the opposition has complained about the minister’s ill-considered expression, the voice that has reacted most sharply has been that of a fellow member of her party, the Galician premier Alberto Núñez Feijóo, who said: “A country with 25-percent unemployment is in a deep economic crisis; as long as this weather does not clear, we cannot say some things that we would all like to say.”

Unfortunately, the economy is not just going through a mild phase of deceleration. The recession is profound, and has now been in place for five quarters. By year’s end it will drag GDP to at least 1.5 percentage points below that of the previous year, which is a fairly serious downturn, though not so great as that of some other peripheral countries within the EU.

The fact that the third quarter has shown a GDP reduction of three tenths of a point, instead of the predicted four, means only a slight easing of the plunge, not an upturn. Additionally, certain factors suggest that the respite will be only ephemeral, this let-up in the general worsening being largely the result of a temporary circumstance — the fact that many people are making certain purchases earlier than planned to avoid the announced hike in VAT.

Inflation

The implementation of the budget, too, will benefit from the effect of the tax hike. Thus, the state deficit declined from 4.77 percent in August to 4.39 in September. But Finance Minister Montoro would do well to moderate his tendency for song-and-dance: for deficit-reduction objective compliance, the deficit in the last three months of the year must rise by no more than about a tenth of a percentage point, which would be Herculean, even miraculous, if we consider the costs of bank restructuring and the diversion of Social Security spending.

On top of the above-mentioned macroeconomic imbalances is new data pointing to 3.5-percent inflation, an exorbitant figure in an economy that is not growing but shrinking. This phenomenon, worse yet than stagflation, warns us that the path out of the crisis is going to be a long march — in which frivolous chatter is the last thing we need.

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