MADRID (Profile Facts) — Spain's prime minister mounted a vigorous defense Saturday of his nation's economy and finances, insisting his administration will forge ahead with austerity measures and force troubled banks and regional governments to reveal information about savings and restructuring efforts.
Jose Luis Rodriguez Zapatero was responding to heavy market pressure that has put Spain in the spotlight as the country that could plunge the 16-nation euro zone into meltdown if it were to end up needing a bailout like those provided to Ireland and Greece.
Many investors believe Portugal could be next in line to need a bailout, and they fear Spain could then follow.
Zapatero spoke after meeting with the heads of 37 of the country's largest corporations, and he said Spain's plans for deficit reduction and increased competitiveness will restore the international confidence that has crumbled throughout the week.
Among those present were Emilio Botin, chief executive of Banco Santander S.A., the country's largest bank, Cesar Alierta of telecommunications giant Telefonica S.A. and Antonio Brufau of energy company Repsol YPF.
The meeting happened a day after Zapatero ruled out any possibility that Spain would require a bailout.
"The government is committed to austerity, to reducing the deficit," Zapatero said Saturday, seeking to reassure investors that his government is taking the threat to its economy seriously.
Many of Spain's provinces are struggling under mountains of debt. Even though they have slashed spending, Zapatero said they must go farther by presenting "quarterly reports on their budgets, which will be added to monthly information from central government."
Zapatero said the structural reforms under way in Spain, which include loosening hiring and firing restrictions in the job market, freezing pensions and liberalizing the energy sector, will eventually boost the country's competitiveness — among the worst in the eurozone.
He said Spain's plans to reduce its deficit were "being fulfilled scrupulously" and added that the country's total debt was 20 percentage points below the European average. Spain's debt at the end of 2009 was euro560 billion ($740 billion), roughly 60 percent of its GDP.
Finance Minister Elena Salgado said leaders who attended Zapatero's unprecedented Saturday meeting of business leaders represented "the tractors of our economy" and that the meeting was held "to discuss growth perspectives and the possibilities of stimulating that growth."
Spain is struggling to recover from nearly two years of recession with unemployment at a eurozone high of almost 20 percent.
Third-quarter GDP growth was flat after two quarters of weak growth, although it was up 0.2 percent year-on-year — the first such rise in seven quarters.
The Spanish real estate sector, the driving economic force in Spain for more than a decade, tanked two years ago and many savings banks — or "cajas" — are now saddled with billions of euros in foreclosed property.
Many of these banks are being forced to merge under a consolidation process scheduled to finish next month. Zapatero said he received a commitment from the banking sector that it will abide by a Dec. 24 deadline.
Javier Ariztegui, deputy governor of Spain's central bank, said Friday that the Bank of Spain has now started to require quarterly and annual account reports from banks relating to capital exposed to real estate debt in a bid to boost investor confidence in Spain's banking sector.
Ariztegui said the cajas are being forced to provide detailed information about construction and residential mortgage portfolios and that they must explain clearly how "assets that could have been damaged" have been dealt with during mergers.
The companies Zapatero invited to the presidential palace Saturday employ more than 1 million workers in the nation of 47 million and create 40 percent of Spain's gross domestic product, the best measure of goods and services in a country.
Zapatero said he won promises from their executives to generate jobs and boost consumer demand.
He also said government programs that provide incentives for exports would be changed to make sure the companies' investments would prove worthwhile, without providing details.
(source:afp)
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