“There are none so blind as those who won’t see”
26/02/2014 | Beatriz Montoya del Corte (Alumna UC)
Spain´s problem is not its risk premium or lack of GDP growth. Spain´s problem is its public expenditures, which are disproportionate to the country´s economy.
The first thing that should be done is to analyze the expenditures. The first step would be to control public expenditure, separating “meat from fat” and removing the unnecessary “fat”. The next thing should be done is to increase growth in order to reduce the number of unemployed people, currently at around 26% of working population.
By reducing unproductive expenditures, we can:
– Balance the external account: Get rid of the annual deficit that forces the government to continue issuing bonds.
– Manage the economic growth: It isn´t necessary cope with cutbacks or with tax increases, the economy can recover by itself from the recession faster by only increasing and managing the economic growth.
The public expenditures in Spain come from the expenses of the three Public Administrations (State, Autonomous Communities and City Councils) and the State-run public enterprises.
The cost of a productive change should not only fall to the working class. In addition, the labour reform has not contributed to job creation. This will not provide a way out of the present crisis. Without removing the “fat” from the public expenditures, it is impossible to grow at a necessary pace to create jobs soundly. For that matter, the Spanish economy´s ills are the results that we can see today.
In conclusion, without reducing expenditures:
– It will be impossible to get below a deficit of 7% of GDP.
– The government will have to further increase their cutbacks, increase taxes or forego growth.
– Debt interest will increase so that it will cover a very large proportion of government revenue and it will create problems to pay teachers, health services, public workers and pensions.
– The Bank of Spain will have to issue more and more government bonds.
Nota: Este artículo ha sido elaborado por Beatriz Montoya del Corte, alumna de la Universidad de Cantabria, como una de las actividades enmarcadas dentro del programa de capacitación lingüística, dando su permiso para la publicación del mismo en FxM.