In an op-ed for the WSJ, Spain's economy minister looks at the measures adopted by the Spanish government since it took office last year.
One often forgets that Spain's current government has been in charge for less than a year and that its reform agenda isn't comparable at all to previously adopted reforms. If prior governments had been more diligent, our problems today would certainly be less grave. The labour reform, the financial sector reform and the fiscal consolidation measures are providing a full and deep solution to our imbalances. All this, moreover, in spite of social tensions, sacrifices and political problems—and without being forced to do so by a so-called bailout.
The doubts about the euro's future have damaged Spain's private sector more than our sovereign debt. The Spanish Treasury has been able to finance itself comfortably thanks to good planning. The Treasury has placed more than 95 per cent of the medium- and long-term debt issuance foreseen for this year at a lower cost than last year. Foreign investors' confidence has improved, and as a result non-resident holdings of Spanish sovereign bonds accounted reached 35 per cent of the total in September.
The labour reform complements the financial sector reform and the fiscal consolidation. The recapitalisation process of the Spanish banks is well-known. It has a very precise timetable and we are informing the public about its implementation with absolute transparency. We are taking the necessary steps to regain the financial muscle that will allow credit to flow again to families and businesses.
Fiscal consolidation is well under way, and when it is complete Spain will have achieved, in a very short time, the biggest adjustment of any OECD country. In structural terms, the adjustment effort will be close to 3 per cent of GDP in 2012. Any deviation is corrected immediately with strong measures, as was the case in July, when the Government decided to raise VAT rates. Our public debt is still 14 percentage points below the eurozone average in the second quarter, which gives us an important cushion when it comes to making adjustments. And our private debt level has fallen by 7.7 per cent from its peak in April 2009, equal to a decline of 16 per cent in terms of GDP.
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