'Austerity works' - Spain's secretary of state says governments must be tough, serious to rescue struggling economies
Published:Tuesday | June 23, 2015 | 12:00 AMDaraine Luton
Arguing that popular political decisions are unhelpful, Spain's Secretary of State for International Cooperation, Jesús Gracia Aldaz, is declaring that austerity is not bad medicine for an ailing economy.
Speaking with The Gleaner yesterday, Gracia's comments came in the context of having seen his country's economy crippled by the global economic recession, forcing its government to make painful adjustments as a precondition to growth.
"In Spain, it (austerity) worked. It was painful, but it worked," said Gracia, who was wrapping up a two-day visit to the island.
Gracia's visit to Jamaica came at the halfway point of a four-year extended fund facility programme with the International Monetary Fund (IMF), which critics say is too austere in nature.
"It is not my duty to judge the Jamaican situation. I don't know the details, but I think that governments have to be serious and consistent, and they have to explain things to the population, things that are sometimes not the most popular things," Gracia said.
DIFFICULT ROAD
"This is something that is difficult for any politician. If polices are implemented seriously, with transparency, with information, and with good principles and good manners, I think that at the end of the day, it will work."
The Spanish secretary of state said his country has been able to emerge from the recession and has started growing again, particularly because of the austerity programme in place there.
"People say it doesn't work. It works. Spain is growing at more than three per cent this year," Gracia said.
Spain has cut back significantly on development assistance to foreign countries and has implemented several controversial reform packages, which Gracia said are partly responsible for the improved showing of the economy.
Similarly, the country has had to cut back on social and other forms of spending.
In addition, in 2012, Spain reformed its labour laws, making it easier for employers to dismiss workers if a business needs to do so for economic reasons. It also reduced the required compensation for dismissals deemed unfair under law and facilitated the hiring of employees on a probationary basis.
Gracia said that in a discussion with his children, he had to push back at their arguments that the reforms would affect individual rights.
"It is not a discussion about rights, it is about how to finance the workforce. You want your workforce to be more productive, more competitive," he said.
Gracia argued that as a result of the reforms, export of goods from Spain has increased enormously.
"We are producing goods at better prices and better quality, and that is something that gives you an advantage in the international economy, and we have done this because we needed to," he said.
A member of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) economies, which experienced significant economic boom before the economic recession in 2008, Spain's recovery is said to have gathered speed and job creation has accelerated, but the level of unemployment is still high.
The IMF has forecast that GDP growth is now expected at 3.1 per cent in 2015 and 2.5 per cent in 2016, well above the euro area average.
Like Jamaica, Spain is a heavily indebted country. Spain's public debt fell to 97.5 per cent of gross domestic product in April. Jamaica's debt-to-GDP ratio is estimated at 138 per cent, and the IMF has forecast that the economy will grow by about two per cent this year.