Spain Says Budget Will Strengthen Employment

Spain’s 2018 general state budget, recently approved by the congress of deputies, will boost growth of employment in the country, according to the BBVA Research chief economist for the Iberian Peninsula, Miguel Cardoso.

“All these measures will result in an increase in domestic demand and, therefore, will underpin the growth of employment and the reduction of unemployment,” Cardoso told Xinhua. “It is correct to say that they are positive in the short term.”

Unemployment is a major challenge for Spain since the financial crisis of 2008 destroyed millions of jobs. The first quarter unemployment rate was at 16.7%, according to the Inquest into the Active Population published by the National Institute of Statistics.

Cardoso said that salaries will increase a priori, faithful to the trend of recent months, and along with the retroactive increase in pensions to be applied next July 1, both of which will strengthen the rise in domestic demand.

However, he stated that the new budget increases the vulnerability of the country in the medium and long term. “The reduction of Spain’s fiscal deficit and public debt will slow down. That rise in debt will create a snowball effect that will leave less room to meet fiscal obligations and, therefore, Spain is more vulnerable,” he said.

Meanwhile, Josep Pique, a former minister with the then government headed by Jose Maria Aznar, agrees with Cardoso that “when addressing the demographic challenge, which is marked by the growth of longevity and a low birth rate, it concerns the inability to achieve a state pact that guarantees the future of pensions after 2030”.

Pique explained that this year budget, amounting to €354.224 billion ($412.9 billion) of spending, is expansive, but warned that it has been presented again with delay and there is a lack of reformist impulse, due to a minority government and the political instability.

“Once again, the opportunity to carry out a fiscal reform that guarantees greater efficiency and income stability, that improves the competitive position, the productivity and the resilience of the Spanish economy in the future is lost,” he said, warning that the income prediction is not realistic.

Pique stated that the 2018 budget reflects the consolidation of the recovery of the Spanish economy, “but without a long-term vision and marked by the electoral calendar.” However, the public accounts also include positive factors, such as investment spending, according to Cardoso.

“It was one of the key factors of the deficit reduction,” he said, “investment meant an improvement in the competitiveness of the Spanish economy.”