miércoles, abril 18, 2007

Zapatero needs to reform as well as celebrate his economy

The transformation of Spain over the past three decades from the dictionary definition of an authoritarian back-water into a prosperous modern democracy is a great European success story.

For the first time, helped by European Union regional policy and structural aid, wealth has spread throughout what for centuries had been an unevenly developed country, where it had developed at all. Spain entered the European club as a middle income economy but its per capita income has now converged on close to the EU average while, in overall size, the Spanish economy is the eighth largest in the world. It has cause for satisfaction.


The way José Luis Rodríguez Zapatero, the Socialist prime minister, chose to celebrate his country’s economic success this week nonetheless betrays self-congratulation bordering on hubris.

Against a backdrop of flickering share prices in the trading hall of the Madrid stock exchange, he told corporate titans and mandarins, ambassadors and ministers, that Spain had never had it so good. Last year had been the best for the economy in three decades of democracy, with growth at 3.9 per cent. The performance this year indicated the bonanza would continue for a good two years yet. The young prime minister confidently predicted this “state of the economy” speech would become an annual highlight.

But he and his government should reflect whether this is a “never had it so good” moment or, rather, that “this is as good as it gets”.

Mr Zapatero is, quite understandably, making political capital out of the Spanish boom at a time of rising political tension with the right-wing opposition Popular party. Yet his administration has done little to take the country’s economic development forward. Keeping a lid on spending is a necessary but insufficient policy; in reality, the Socialists appear to see virtue in doing nothing.

The three main elements underpinning Spain’s economic expansion are: low eurozone interest rates; putting a huge stock of unemployed labour (including immigrants) to work; and an unbridled construction boom. That is a very vulnerable mix, especially when coupled with: very low productivity growth; a weak technology base and ossified education system; and the second biggest current account deficit in the world after the US, at $107bn last year, or 8.8 per cent of gross domestic product.

Mr Zapatero had little of substance to say about how to reduce these imbalances, how to foster competitiveness and innovation, or how to identify sectors and push through reforms that will help sustain growth in the future. That is not a sustainable policy as monetary conditions tighten in a recovering eurozone and as competition from east and central Europe and Asia stiffens. Spain needs to re-engineer its economy as well as celebrate it.

Fuente: Financial Times

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