The euro zone

Great expectations

Ever the optimist, Spain's economy and industry minister has recently been hinting that the country's economic growth might exceed the predicted 3.2% for last year. That figure, it should be remembered, was already pretty positive: it's about twice the eurozone average and applied to a year in which Spaniards spent ten months without a properly functioning government. Yet Luis de Guindos told radio station Cadena Ser on January 1st that "the estimate we're handling is that growth may have been higher in 2016 than in 2015". Growth in 2015 was 3.2% as well, but then 2015 was relatively stable.

If it seems surprising that Spain might post a similar - or even better - figure for a year in which it had a sleepwalking administration for ten months, remember the example of Belgium. Between 2010 and 2011 it lacked an elected government for 589 days - over a year and a half - and the economy didn't flinch. Spain was kept afloat during 2016 by a bumper tourist year and increased consumer spending among Spaniards; indeed, the prolonged lack of administration only really impacted on the preparation of the 2017 budget - still pending, much to the EU's annoyance - and spending on new infrastructure projects, which ground to a halt between January-November.

Now the politicians are back, this year's growth is actually expected to be less than 2016's. The official prediciton is for GDP expansion of 2.5% in 2017: this downgraded estimate reflects the risks posed by Brexit, a potential decrease in consumer spending and the fact that Spain is supposed to prioritise meeting EU budgetary goals to avoid sanctions from Brussels. The latter will involve a politically toxic combination of tax hikes and spending cuts that are currently being cooked up behind the closed doors of government.

De Guindos, by the way, is also very upbeat about the Spanish government's ability to raise the extra five billion euros or so needed to keep the accountants in Brussels happy: he says it will mainly be raised by blocking corporate tax loopholes that were put in place to enable businesses to recover from the recession. For its part, the EU remains justifiably sceptical of Spain's ability to make the grade in this respect: every single year it has been in office, Rajoy's Popular Party has failed to meet Brussels' deficit-reduction goals. Why should 2017 be any different, especially now that Rajoy now leads a minority administration that faces fierce opposition - from left and the new right - in congress?

Labour minister Fátima Báñez has also being spreading a positive new year message, declaring last week that 2017 will be a "year of hope and of confidence". She wields the statistic that, of more than 3.5 million jobs lost in Spain during the recession, 1.7 have been recovered. Any kind of reparation of the enormous economic damage represented by that figure is better than nothing; the problem is, though, that not enough of those new 1.7 jobs are permanent, stable positions. Permanence and stability are currently in short supply in the Spanish labour market (as I wrote here last week, as well) - a fact which needs to change if 2017's growth target is to be met or exceeded.