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Zapatero announces 5-year cure for economy

Source: El Pais - Thu 23rd Dec 2010

The country will need at least five years to correct the "structural imbalances" within the economy, the Prime Minister warned as he spoke in Congress yesterday. As this time scale covers what little remains of his government's current term and almost all of the next, and with elections due in 2012, Zapatero called for unity across political parties as recovery is "a collective task" and not the job of any particular government - "no matter what its political stripes."

Zapatero went on to list the hurdles that the country will have to overcome in this time frame - such as guaranteeing fiscal stability in the long run; modernizing labor institutions; reforming professional services; reducing the administrative burden; reinforcing regional cooperation to eliminate differences between the regions; reaching a deal on the make-up of the energy industry; and consolidating the welfare state.

The leader of the opposition, Marion Rajoy, said that his party will vote in favor of reforming the Lisbon Treaty in order to incorporate a new financial stability mechanism. He also offered a pact on the EU budgetary framework for 2014-2020, when Spain will become a net contributor to Europe's coffers.

Zapatero acknowledged the gesture and referred to Rajoy's speech "reasonable and constructive," adding he felt confident that this tone was not just the result of "the Christmas spirit." His laying out of a five-year timetable to mend Spain's economy will raise eyebrows amongst analysts, coming two days after his announcement that he had made a decision on whether he would stand for a third term, but would not be making an announcement at this time.

The PM denied that Spain was the mirror that all Europe looked into under the Popular Party governments of 1996-2004, as Rajoy had claimed, and noted that in the last 15 years the Spanish economy has been steadily losing competitiveness.

During the eight years of PP rule, productivity grew 0.4% annually, compared with 0.6% under Socialist administrations, he argued. This compares poorly with an average of 1.7% for the European Union and 2.2% for the United States during the same period. It is this growing gap that is at the origin of the current Spanish deficit, said Zapatero, and not in lack of action on the part of his own government. Although he avoided an in-depth debate on the thorny topic of pension reform, Zapatero said that pushing the legal retirement age to 67, up from 65, is not a message for the markets but for young Spaniards, who will thus be guaranteed a pension worthy of the name.

Using Germany and Sweden as examples, who made the same reform years ago, Zapatero said that if "a reasonable effort" is not made now, a day will come when Spanish society will be facing a wall that may be impossible to overcome.

The leaders of the CCOO and UGT labour unions, Ignacio Fernández Toxo and Cándido Méndez, met with Zapatero and Labor Minister Valeriano Gómez over the weekend at La Moncloa to find agreement on the issue of pension reform, although without success.

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