World Economy

Spain Urges Europe to Focus on Trade, Banking

Spain Urges Europe to Focus on Trade, BankingSpain Urges Europe to Focus on Trade, Banking

Spain’s economy minister has urged European governments to look beyond a rising clamor for fiscal stimulus and focus instead on boosting trade and fixing ailing banks to spur more growth.

“If you limit free trade and if there are doubts about the health of the banks then it is going to be extremely difficult to have a real recovery in Europe,” Luis de Guindos said. “That kind of slow-motion economy is the ideal landscape for populism,” Yahoo reported.

De Guindos’s comments clash with recent calls from Brussels for more spending by some EU governments to boost demand. Pierre Moscovici, the EU’s budget commissioner, last week called on governments that “have budgetary room for maneuver to spend and invest more, both in their own interest and in the interest of everyone”.

Donald Trump, the US president-elect, has also raised expectations of looser fiscal policy, promising to push through tax cuts and boost investment in infrastructure.

While de Guindos said “loosening might be the correct policy in countries that have the fiscal space”, he insisted that other policies were more important.

“Fiscal stimulus by itself is not going to fix our problem. We need to talk about free trade, about structural reforms and about addressing the situation of the banks in Europe,” he told the Financial Times.

The immediate concern for Madrid is the wayward budget deficit. Spain is on track to post a deficit of 3.6% of gross domestic product next year, or 0.5 points more than agreed with Brussels.

De Guindos said Madrid was committed to reach its target, equivalent to about €5.5 billion ($5.85 billion), with a focus on corporate tax revenues. “We are not going to touch VAT and we are not going to touch personal income tax. The bulk of the adjustment in terms of revenues has to come from corporate taxes,” he said.

“In 2007, Spain collected about €40 billion in corporate taxes. This year, it is going to be about €20 billion. That is partly due to the crisis but now we are in a recovery and corporate profits are starting to come back to the level we had in 2007. What is the difference? Many companies have accumulated a negative tax base and you can deduct that.”

The government would now close some of the “loopholes and deductions” used by companies, he said.


Add new comment

Read our comment policy before posting your viewpoints