Sorry about the title
Couldn’t help myself…

No further austerity for Spain, says Rehn

November 15 (FT) — Spain will need no further austerity measures until the end of next year even though it will easily miss its deficit targets, EU economic commissioner Olli Rehn, said. We are not so much focused on the nominal targets, even though they often make easier headlines because they are exact percentages, Mr Rehn said. To my mind, [it is] both the right way of doing it from an economic point of view but also the correct way of applying [EU rules]. He added that Spain must still do more in 2014, when Madrid is required to get its budget deficit, which was 11 per cent of gross domestic product at the end of last year, down below the EU threshold of 3 per cent. Spain was supposed to reduce its deficit to 6.3 per cent of GDP this year and 4.5 per cent next year.

8 Responses

  1. That’s hardly encourging. Rather like saying “We amputated one leg & one arm, but you won’t need any more surgery this year.” ?

      1. @Ben Johannson,

        All Scandinavians use Finns for humor.

        Canadians use Newfies .. (Newfoundland)

        Americans, for some unexplained reason, use Poles.

        and the 1% use the 99% (unlike Romney, usually only behind closed doors)

  2. Forgive my being tedious, but percentages are a big problem, if only because what they measure is different whether they’re going up or down. But, in this case, it strikes me as even worse because the behavior of one entity, the Spanish government, is supposed to be responsive to something over which it has no control, the GDP.
    As a little documentary making the rounds, “The Economics of Happiness,” points out, the rebuilding in response to a natural disaster like Sandy and an increasing incidence of cancer requiring medical treatment both register as an increase in GDP, even though the product makes us no better off.
    In any event, since Spain is reported to have economic activity, equivalent to thirty percent of its GDP in the so-called “shadow economy” — i.e. not captured by government accountants because the transactions are untaxed — the GDP can be increased by simply “improving” tax collection mechanisms without affecting the production of goods and services at all. And if, as a response, cash transactions flee into barter, GDP will shrink even more, even though the people may be better off.
    Rules of thumb made up of percentages are potentially deadly. Nuclear energy plants were initially “sold” on the basis of a projected increase of energy consumption of seven percent per year, ad infinitum. The actual over the last three deceased was about two percent and in 2011 energy consumption in the U.S. decreased. Meanwhile, we haven’t replaced old plant, maintained the grid or improved transmission because the expected profits haven’t been realized, in part because we have been relying on people, who can’t tell the difference between looking ahead and wishful thinking, to make decisions.

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