surinenglish

THE EURO ZONE

Don't worry about it

Spain was among several European countries to receive a letter from the EU Commission this week, expressing concerns over how it will manage its public finances next year. The nudge was inevitable, as the acting Socialist government of Pedro Sánchez wasn't able to send a detailed budget proposal to Brussels in advance of the October 15th deadline. Indeed, the Socialists don't even know whether they will be in power in 2020, although polls suggest that Sánchez's party will once again take the largest share of the vote in the next election, due on November 10th.

Having said that, the Commission doesn't really have reason to be concerned about Spain in this respect, even though the country is in the grip of yet another political deadlock after an inconclusive general election on April 28th. The list of Spain's recent economic achievements is impressive: this year, its budget deficit was brought under the Brussels-imposed limit of 3% for the first time in over a decade which, in turn, allowed the country to exit the EU's Excessive Deficit Procedure. And since Spain officially exited recession at the end of 2013, its GDP expansion has consistently beaten the eurozone average.

The country's political limbo is unlikely to be broken by the November 10th election, but most of the above happened during the rule of a minority Socialist government that was unable to be fiscally proactive (with the exception of the GDP expansion, over which the last Conservative administration mainly presided). Even if, as is likely, the next national vote results in another lengthy power vacuum, recent precedents suggest that Spain's economy will perform well anyway. Of all the EU's southern members, then, this is the one that presents the least cause for concern, at least economically-speaking.

That hasn't always been the case, of course. The EU was more justified in its criticism of the government of Mariano Rajoy, which was in power from 2011 to last June, when Sánchez ousted the Conservative veteran with a no-confidence vote. Rajoy failed to meet a single Brussels-imposed target, for which Spain narrowly avoided being fined by the Commission in 2016. Even so, the Spanish economy steadily improved during his stint as prime minister, although unemployment was - and remains - a big problem.

So, why did Spain really receive a nagging letter from Brussels this week? The EU Commission, led by outgoing president Jean-Claude Juncker, needs to be seen to be meddling in its members' finances, mainly in order to justify its existence.

In doing so, it prompts us to question the viability - both theoretical and practical - of an overarching executive trying to control the economies of different countries with blanket fiscal rules, or even whether the existence of such an organisation is desirable in the first place.