the eurozone

Come together

The Spanish economy minister has apparently turned into the EU’s biggest fan. In an interview with the UK’s Financial Times this week, Luis de Guindos said that the only way for the EU to survive in a post-Trump-Brexit world was to come closer together; in particular, he called for greater economic integration and for EU executives to be given more control over member states’ economies. The minister admitted that his suggestions were rather “aggressive”, but he was emphatic that a more tightly bound EU was crucial to its survival.

Is this really the same politician who has maintained a conspicuously flippant stance towards the bloc’s fiscal policies over the last few years? De Guindos’ Popular Party government has failed to meet Brussels’ deficit reduction targets every year it’s been in office and only narrowly avoided a fine for its laxity last summer.

When reminded by Brussels that Spain’s deficit needs to be a priority for the Ministry of Economy (as he often is), De Guindos usually retorts by saying that continuing the country’s growth is more important.

Yet the EU is not assuaged by the minister’s focus on GDP expansion: the Commission told Madrid at the end of last month that it will continue to closely monitor Spain’s deficit and debt levels even after the country exits the Excessive Debt Procedure (EDP) next year.

Curious, then, that De Guindos apparently wants the EU to have even more economic control over member states than it already does. The economy minister told the FT, “You need someone who can say to Spain: ‘You need to have a labour market reform and this has got to be done by the end of the year’.”

In fact, this is exactly what’s happening at the moment. When Spain avoided a fine from Brussels for fiscal lassitude last July, the Commission gave Mariano Rajoy’s government an extra two years - until 2018 - to bring its deficit under the EU ceiling of 3%. The PP insists this will be achieved next year, but Brussels remains sceptical, not least because 2017’s budget has only just been approved by a deeply fragmented congress.

EU executives are also concerned about Spain’s debt, which is forecast to be 98.5% of GDP next year - over 40% in excess of the official 60% target. According to EU rules, the Spanish government will have to reduce debt by 2% of GDP every year until the magic figure of 60% is reached.

In other words, the EU is already bearing down on Spain in the way De Guindos says he’d like it to in a toughened-up, more integrated bloc. Perhaps, before he asks Brussels to be even stricter with his country, he should first hit the targets it’s already set for the Spanish economy.