No reversal of tax hike until economy in recovery mode, minister says

Government expects return to growth in 2014, with GDP forecast to rise 0.4 percent

Madrid -

Economy Minister Luis de Guindos on Monday conditioned the reversal of the hike in personal income tax, introduced last year as a deficit-busting measure, to a “clear recovery” in activity in 2014.

De Guindos’ comments were in line with those of Finance Minister Cristóbal Montoro, who in an interview published Monday with the financial paper Cinco Días said it was impossible to cut taxes under current conditions.

In its updated economic scenario for the next few years, the government predicts a return to meager growth of some 0.4 percent in 2014, with the economy expected to remain in recession this year. It will not be until 2016 when the pace of growth returns to levels of over one percent. Even that will be insufficient to create jobs in a significant way to reduce unemployment, which has hit a record 27.2 percent, with 6.2 million workers out of a job.

De Guindos rejected the Bundesbank’s criticism of the performance of the European Central Bank (ECB) as being based on its own particular vision of things and urged the German authorities to focus more on the interests of the euro zone as a whole. Bundesbank President Jens Weidmann on Sunday took objection to the ECB’s recent cut in interest rates.

The economy minister was speaking at a joint presentation with Agriculture Minister Miguel Arias Cañete of the government’s plans to double the exports of Spain’s food industry over the next five to six years. In order to do so, the Agriculture Ministry plans to establish a committee for the sector, which will produce annual reports and act as a forum of the exchange of information.

De Guindos said the domestic food industry highlights the efforts to enhance the internationalization of the Spanish economy and help pull the country out of the crisis. “Gaining competiveness and the search for markets is the great hope for emerging from the crisis,” he said.

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