ECONOMY

EU should give Spain more fiscal flexibility, says White House

Chairman of Council of Economic Advisors says Brussels should relax its regulations

Jason Furman, chairman of the U.S. Council of Economic Advisors.
Jason Furman, chairman of the U.S. Council of Economic Advisors.Andrew Harrer / Bloomberg

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The White House says that Europe’s fragile recovery is due to errors in the euro zone’s economic policies, and is asking Brussels not to impose further austerity on countries such as Spain, Portugal and Italy.

“The European Commission will make its own decisions,” said Jason Furman, chairman of the Council of Economic Advisors in the Barack Obama administration, in statements to EL PAÍS. But the euro zone, he added, “needs a flexible application of fiscal rules in countries like Spain, and a fiscal expansion where there is leeway for it.”

While admitting that the United States’ own handling of economic policy following the fall of Lehman Brothers “was imperfect,” Furman noted that America returned to pre-crisis GDP levels five years ago with a combination of expansive fiscal policies, extraordinary monetary policy and a quick banking overhaul.

While Brussels says that “the rules are the rules,” Washington does not see it that way

“The pace was very different in Europe, partly due to institutional problems,” he said, citing the European Central Bank’s decision to raise interest rates in 2011 and “an uneven bank cleanup, with very debatable stress tests.”

As a result, the euro zone has returned to pre-crisis GDP levels five years later than the US.

The US government is worried that Europe may be about to repeat the mistakes of the past, added Furman in a conversation in Brussels.

EU legislation mandates cracking down on member states that fail to meet deficit targets, no matter what their individual economic situation. Spain and Portugal face fines and demands for greater adjustment.

But the US, the ECB and the International Monetary Fund (IMF) are warning that this could be counter-productive.

While Brussels says that “the rules are the rules,” Washington does not see it that way. Asked specifically about Spain, Furman said that the White House supports “a flexible application of fiscal regulations” and “a fiscal expansion where there is leeway for it.”

The Spanish economy grew 3.2% in 2015, but the rate is slowing down and Spain posted a deficit of around 5% of GDP, far in excess of its EU target. Unemployment continues to be one of the highest in the European Union.

English version by Susana Urra.

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