“Recession is in the past,” says economy minister
Spain would have needed a full bailout if it hadn't applied for a bank rescue, argues De Guindos
Economy Minister Luis de Guindos believes that Spain has “left the recession in the past,” and that within the upcoming quarters the country will begin to see small signs of growth.
In an extensive interview with EL PAÍS, the minister admitted that less than two years ago, Spain’s economy “was on the verge of collapse.”
“Today we are in a totally different situation. Indeed, a million more jobs are gone but the risk premium was much higher back then and it was being artificially sustained by the European Central Bank’s [ECB] purchase of bonds,” he explained. “There was also a difficult shortage of funds at Spanish banks, and we found ourselves in the middle a of slowdown that was becoming more and more intense, and had left us on the verge of asking for a bailout.”
If Spain hadn’t asked for a rescue of its banks — so far to the tune of 41.3 billion euros — the country would have needed a full bailout, according to De Guindos. The European Union approved a total of 100 billion euros to help recapitalize Spanish banks, but the government only decided to tap into less than half of that amount because that was all that was needed, he said.
De Guindos also explained that he wasn’t placing much importance on the latest forecasts for Spain from the International Monetary Fund (IMF), which stated last week that the Spanish economy would contract by 1.6 percent this year. Revised IMF figures released last Tuesday also predict that the economy will have a 0.0-percent growth rate next year instead of a 0.7 percent rate as it had originally forecast.
“The IMF is much more pessimistic than the average market projections, which, according to Spanish analysts, say that there will be a 0.7-percent growth rate, or 0.3 percent according to other international agencies. Let’s see what happens,” he said.
Despite Spain’s 27-percent unemployment rate — more than 50 percent among young people — De Guindos said that he believes the job market will improve in the coming quarters as recovery sets in.
“What we have to do is take care of that recovery as if it were a small seedling inside a greenhouse. And the way to take care of it is through economic reforms, improving financing, and reducing the fiscal deficit at a modest rate.
“In Spain, the sequence of recovery has always been the same: expanding imports, then comes investment, and finally, strengthening consumer spending. We have already completed the first step and we are now entering the second.”