News March, 22nd 2010 by

Spanish government approves economic overhaul

With many observers wondering whether Spain might go the way of Greece, which is now facing a bailout from the International Monetary Fund, the Spanish cabinet last Friday approved a bill to tackle many of the issues facing the economy.

Economists and politicians at home and abroad are expressing alarm at Spain’s economic difficulty. U.S. republican Congressman Mark Kirk last week told a congressional committee that Spain’s economy is “five times worse than that of Greece” and called for the U.S. Securities and Exchange Commission (SEC) to require U.S. companies to disclose the full extent of their exposure to the ailing economies of Greece, Italy, Portugal, and Spain.

Although observers remain focused primarily on Greece, statistics do illustrate the extent of Spain’s troubles. The Spanish economy shrank by 0.1 percent in the last quarter of 2009. Unemployment runs at 20 percent, the highest among euro countries. Forty-five percent of workers under the age of 25 are jobless.

Spain’s budget deficit currently stands at 11.4 percent of gross domestic product, or four times higher than European Union rules permit. Some politicians blame that deficit on the government’s stimulus package last year, which pumped billions of euros into the economy in an attempt to slow the fall.

In the current bill, the government will focus on boosting new industries such as renewable energy and biotechnology, while also targeting more traditional sectors such as aeronautics, automobiles and food to provide some long-term growth potential.

As part of the new economic strategy, Prime Minister Jose Luis Rodriguez Zapatero also announced on Saturday that the government will cut its own energy consumption by 20 percent, saving more than 3 billion euros per year. The move will affect some 2,000 public buildings throughout Spain.

This overhaul follows a plan unveiled on January 29 to save 50 billion euros on the national budget in an attempt to slash the deficit from 11.4 percent to under 3 percent, the figure permitted by the E.U.

After the cabinet approved the bill during a meeting in the Andalusian capital of Seville, Zapatero was reported as saying the bill is essential for Spain’s present and future.

Spain is the fourth largest economy in the eurozone. Like most developed economies, however, it has fallen to the global financial crisis, with the country’s property sector collapsing in 2008. 

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