Catalan economists ask for European public funds to restructure Spanish Banks

Barcelona (ACN).- On Friday, the Cercle d’Economia, the main Catalan economic forum open to businesspeople and academics, urged European intervention in the “exceptional” crisis in the Spanish banking system. After the Spanish Government announced it will nationalise Bankia, former Spanish Minister of Industry and Foreign Affairs during Aznar’s times and Chairman of the Cercle d’Economia, Josep Piqué, asked the European Union to adopt “drastic” measures in order to tackle a “systemic problem at European level”. “The Spanish Government will not succeed alone”, considering the dimension of the Spanish banking system’s crisis. Piqué supported the idea of using public money to rescue banks, but he pledged to use European funds, since the problem goes far beyond Spain’s borders. Piqué was presenting a report entitled ‘To recover from the crisis in Spain and Europe: an agenda rebalancing European Union’s priorities’ ('Per sortir de la crisi a Espanya i a Europa: una agenda pròpia i un reequilibri en les prioritats de la Unió Europea' in Catalan).

Josep Piqué said this new report is a continuation of a report the Cercle d’Economia published in October, when they were already asking to combine austerity measures with policies fostering economic growth. Piqué was harsh with the diagnosis of the Spanish economy, with almost 6 million unemployed people and a 50% youth unemployment rate. He talked about “a lost generation”.

Political powers must lead and not only react to the markets’ movements

The new document asks the Spanish Government and the European Union to adopt their “own agenda”, which means they should lead the political initiative and not only react to the markets’ movements. The main priority of this agenda should be tackling unemployment, followed by improving business competitiveness. In addition, they also asked to finish the financial system reform in order to reactivate loans, to balance public finances, and to implement an institutional reform, in Spain and at European level.

Create ‘minijobs’ and adopt further “exceptional” measures

To tackle the “unbearable” unemployment, the Cercle d’Economia asks for “exceptional and urgent measures”. One of these measures might be approving the creation of the so-called ‘minijobs’. It is a labour relation measured by hours and with very low salaries, with incentives regarding social contributions. In Germany there are more than 7 million minijob contracts. They ask to adopt “exceptional and temporary measures”, such as this last one, since “this crisis’ singularity and the current unemployment figures” will not allow that a simple economic recovery would create enough jobs to absorb all the unemployment created in all these years.

Relax Spain’s public deficit targets for 2012 and 2013

In addition, Piqué insisted in combining economic growth policies with fiscal consolidation, which are not “incompatible”, he said. He also asked the EU to “temporarily” relax Spain’s public deficit targets for 2012 and 2013. Piqué defended that the deficit might be significantly reduced beyond 2013, once the economy grows again. He said that meeting the current deficit targets is impossible due to the recession. However, if there is flexibility regarding the 2012 and 2013 deficit targets, in any case this might be translated into “a relaxation” of the austerity measures, which need to continue.