Spain faces difficult year but corner will be turned, says Rehn

29 Jan 13
Spain has made ‘important progress’ towards a sustainable growth model and must press ahead with its reform programme, Vice-President of the European Commission Olli Rehn said yesterday.

By Nick Mann | 29 January 2013

Spain has made ‘important progress’ towards a sustainable growth model and must press ahead with its reform programme, Vice-President of the European Commission Olli Rehn said yesterday.

Speaking in Madrid, Rehn said that he was aware of the ‘difficult social situation’ many Spaniards were facing as a result of the economic crisis. But, he stressed that Spain had made ‘positive developments’ which reflected ‘steadily growing confidence in Spain and its economic policy’.

‘We have seen important progress in Spain towards a more sustainable growth model and it is important that long-standing obstacles to growth and competitiveness are being removed,’ Rehn explained. ‘For instance, the labour market reform has been moving forward and now it needs to be complemented with policies to the unemployed find new work or training opportunities.’

Rehn said he had ‘no doubt’ the reforms being carried out by Spain would ‘bear fruit’, but acknowledged that it would take ‘some time’ for their full effects to be felt.

‘This will be another difficult year, but I am confident that it will also be the year in which the corner is turned, in which Spain and the euro area as a whole can move from stabilisation to a sustained recovery,’ he added.

Official figures published last week revealed that Spain’s unemployment rate in the last quarter of 2012 rose to 26% and its youth unemployment rate increased to over 55%.

Rehn said it was also ‘essential to repair and reform the financial sector so that money is made available for small and medium-sized enterprises to invest and create jobs’.

He added: ‘It will be important also to maintain the fiscal consolidation effort, because a sustained recovery demands sustainable public finances.’

In later comments, Rehn hinted Spain could be given more time to reduce its deficit in the event of a ‘serious deterioration’ of the economy. The European Commission is expected to confirm next month that Spain missed its target of reducing its deficit to 6.3% of gross domestic product last year and the Bank of Spain had indicated this year’s goal of 4.5% will only be met with further austerity measures.

While Spain has so far avoided a full bailout of its economy, it received around €40bn from its eurozone partners last month to inject into its ailing banking sector.

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