Saturday, July 30, 2011

Did an IMF report, panic Spain into an early general election?

The Wall Street Journal briefly summarises the latest IMF findings on Spain, linked here, made public around the time of Zapatero's announcement of the election coming forward by four months.

France's AFP, gave more detail; some of the IMF quotes it gave being as follows:

"Unwinding imbalances accumulated during the long boom and reallocating resources across sectors will take years and will require determined policy action," it said in a report.
"And many of the underlying problems of the Spanish economy, especially weak productivity growth and a dysfunctional labor market, remain to be fully addressed."

...."unemployment remains unacceptably high, inflation is again above the euro area average and sovereign and bank funding costs remain elevated and volatile.

"The recovery is likely to be modest and export-led, with significant downside risks dominating, especially that of further contagion from rising concerns about sovereign risks in the euro area."

Given the above, is it not somewhat surprising that the Spanish Government did not follow the example of Cyprus, set earlier in the week, by having the Cabinet resign en masses and call a prompt general election?

Spain has thus become yet another EMU member to be delivered a lame duck government. Co-incidence?



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