interview

“This devaluation will see Spain recover its credibility and confidence”

Finance Minister Cristóbal Montoro defends the government’s handling of the economy

Finance Minister Cristobal Montoro.
Finance Minister Cristobal Montoro.Bernardo Pérez

Finance Minister Cristóbal Montoro is one of the politicians in Spain who has argued most in favor of low taxes. But at the same time, he has overseen a raft of tax rises. He argues that there was no other choice, and that the increased rates being paid by Spaniards have ensured that stability and confidence are returning to the economy, bringing about a recovery that, he argues, is already noticeable. In this abridged version of an interview with EL PAÍS, Montoro defends the government’s handling of the economy since it came to power in 2011.

Question. The Bank of Spain believes that the economy has returned to growth. In Congress last week you said that we were seeing the light at the end of the tunnel. Are there green shoots?

Answer. That expression does not seem appropriate in my opinion. In Spain we are seeing a turning point, a new change, but it is not a green shoot. We have never before carried out a devaluation without touching the exchange rate of our currency. I remember that the last devaluations in the 1990s involved 30-percent losses of the value of our currency. What we have done this time around is equivalent to that, but without a devaluation in the exchange rate — rather by what we class as an internal devaluation. What’s more, this devaluation is happening without inflation. It’s extraordinary. That is what is seeing Spain recover its credibility and confidence.

Q. Government forecasts from a year ago predicted that the economy would shrink 0.5 percent, but the actual figure is 1.3 percent...

A. That was the target that I set. But we knew that we weren’t going to achieve it. When we announced that forecast we were in completely different circumstances.

Q. How would you explain to the million people who have lost their jobs since your government has been in power that we are better off now?

A. We are right on the cusp of economic growth. And that must bring back the opportunity of a job for all. We are going through a very difficult time, requiring a lot of effort and in the midst of a second recession that was not in the forecasts. We have spent practically five consecutive years mired in a crisis. What I have to explain to the public is that there are solid economic foundations for recovery. If the recession had not come to an end, we would be talking about other issues.

Q. You have always championed tax cuts. What has it been like being the minister who has imposed the biggest tax rises in Spain’s democratic era?

A. This is a temporary thing. I have lost count of the number of times I have apologized to the public. But these efforts are making a real difference. In politics, once you have accepted these responsibilities, we are here to do what needs to be done.

Q. The rise in personal income tax was described by the government as being “temporary.” Is there a risk that a return to previous rates will be diluted by your upcoming tax reforms planned for 2015?

A. We are going to completely redefine income taxes. It is not a question of just changing their structure. The modification will involve a reduction compared to 2014, but in equitable terms.