29 November 2012

OECD: Spain has embarked on the path to recovery, but must continue with reforms

According to the OECD, Spain is immersed in a prolonged recession that has been compounded by the continuing crisis in the euro area. The path to recovery will require additional measures to restore confidence in the financial sector, redress public finances and bring down high unemployment.

The report recognises the wide-ranging reform process now underway. However, it points out that adverse conditions will limit the short-term impact of reforms. Indeed, the Survey projects that the Spanish economy will contract by 1.3 per cent this year and an additional 1.4 per cent in 2013, before returning to a 0.5 per cent growth rate in 2014.

“Spanish authorities have launched a courageous reform programme to address the root causes of today’s crisis, and they should be commended”, OECD Secretary-General Angel Gurría said during the Survey launch. “While uncertainty in the euro area and the continuing global economic slowdown complicates Spain’s path to recovery, we are sure that the country is moving in the right direction. The cost of economic reforms may be high today, but the pay-off will be a stronger Spain, better equipped to compete in the global economy.”

Among key reforms drawing praise in the Survey are substantial budgetary consolidation measures and the reinforcement of budgetary rules, as well as broad and deep reforms of the labour market and the banking sector. The OECD Secretary-General also welcomed the approval yesterday by the European Commission of the conditions for restructuring and recapitalising Spanish banks (view/view) as an important milestone.

“We are already seeing positive developments and results, particularly in terms of restoring competitiveness and closing imbalances with Europe”, Mr Gurría said. “The cost of this consolidation may have been higher than expected, due to external conditions facing Spain, and unemployment remains unacceptably high, but there is no doubt that this process will bear fruit. Until then, every effort must be made to address the social impacts of the crisis and protect the most vulnerable”, he added.

Press release

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